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Federal  Revenue  Act 


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GIFT  OF 


Digitized  by  the  Internet  Archive 

in  2008  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/federalrevenueacOOnatirich 


Federal  Revenue  Act 

of  1918 


Complete    Text 
Reference  Notes,  Tables  and  Index 


'    -  # '  ^  •> 


National  Bank  of  Commerce 
in  New^  York 

February,  1919 


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Foreword 

Federal  taxes  for  both  1918  and  1919  are  levied 
in  the  new  Federal  Revenue  Act,  thus  making  it 
possible  for  business  men  to  know  in  advance  what 
share  of  earnings  the  Government  will  require  in 
taxes  for  the  coming  year. 

The  new  law  contains  distinct  improvements  over 
the  Acts  of  1916  and  1917,  which  it  replaces.  It 
consolidates  scattered  provisions  relating  to  taxes 
on  individual  income  and  reUeves  individuals  and 
partnerships  from  the  excess-profits  tax.  It  also 
permits  deduction  of  losses  in  transactions  not  di- 
rectly connected  with  trade  or  business  and  removes 
the  limitation  upon  the  deduction  of  interest  upon 
indebtedness. 

In  this  book  the  National  Bank  of  Commerce  in 
New  York  presents  the  full  text  of  the  greatest 
revenue  bill  in  history.  A  complete  index,  side- 
notes  and  tables  are  added  to  aid  in  the  interpreta- 
tion of  the  statute  and  the  computation  of  taxes. 

The  service  of  our  Income  Tax  Department  is 
available  to  our  friends  in  the  explanation  and  ap- 
plication of  the  law. 

James  S.  Alexander, 

President. 


393209 


CONTENTS 

PAGE 

REVENUE  ACT « 

I.    General  Definitions 5 

II.    Income  Tax 8 

III.  War-Profits  and  Excess-Profits  Tax .  69 

IV.  Estate  Tax 87 

V.    Tax  on  Transportation  and  other  Fa- 
cilities, and  on  Insurance 99 

VI.    Tax  on  Beverages 107 

VII,    Tax  on  Cigars,  Tobacco,  and  Manu- 
factures Thereof 138 

VIII.    Tax  on  Admissions  and  Dues 141 

IX.    Excise  Taxes 145 

X.    Special  Taxes 154 

XI.    Stamp  Taxes 170 

XII.    Tax  on  Employment  of  Child  Labor.  182 

XIII.    General  Administrative  Provisions..  .  187 

XIV.    General  Provisions 207 

APPENDIX   213 

Computation    Tables    for    Individual 

Income  Taxes 214 

Computation  Tables  for  Corporation 

Taxes 217 

Comparison  of  Taxes  on  Corporations 

and  on  Partnerships 225 

INDEX 227 


*       »   >J,    •    '   " 


•....••.•.;,.::VHi'.HA 


REVENUE  ACT 

Approved  February  24»  1919 

In  effect  February  25,  1919,  except  where  otherwise 
herein  specially  provided 

[Public— No.  264 — 66th  Congress] 

[H.  R.  128631 

An  Act  to  provide   revenue,  and   for  other  purposes. 


Be  it  enacted  by  the  Senate  and  House  of  Representatives 
of  the  United  States  of  America  in  Congress  assembled. 


TITLE  I. 

General  Definitions 

Sec.  1.    That  when  used  in  this  Act — 

The  term  "person"  includes  partnerships  and  cor-  Persons 
porations  as  well  as  individuals ; 

The   term   "corporation"   includes   associations,  CorporaHons 
joint-stock  companies,  and  insurance  companies; 

The  term  "domestic"  when  applied  to  a  corpora-  DomesHc 
tion  or  partnership  means  created  or  organized  in 
the  United  States ; 

The  term  "foreign"  when  applied  to  a  corporation  Foreign 
or  partnership  means  created  or  organized  outside 
the  United  States ; 


«     '• 


•       *    » 


•    -    •  a-'  «    •  •  • 


United  States 


•^  »•  3   «•    * 


RsTSKUx   Act 


Secretary 

Comnussioner 

Collector 

Revenue  Act  of  1916 


Revenue  Act  of  1917 


Taxpayer 
Government  contract 


Informal  contracts 
included 


The  term  "United  States"  when  used  in  a  geo- 
graphical sense  includes  only  the  States,  the  Terri- 
tories of  Alaska  and  Hawaii,  and  the  District  of 
Columbia ; 

The  term  "Secretary"  means  the  Secretary  of  the 
Treasury ; 

The  term  "Commissioner"  means  the  Commis- 
sioner of  Internal  Revenue ; 

The  term  "collector"  means  collector  of  internal 
revenue ; 

The  term  "Revenue  Act  of  1916"  means  the  Act 
entitled  "An  Act  to  increase  the  revenue,  and  for 
other  purposes,"  approved  September  8,  1916; 

The  term  "Revenue  Act  of  1917"  means  the  Act 
entitled  "An  Act  to  provide  revenue  to  defray  war 
expenses,  and  for  other  purposes,"  approved  Octo- 
ber 8, 1917; 

The  term  "taxpayer"  includes  any  person,  trust 
or  estate  subject  to  a  tax  imposed  by  this  Act; 

The  term  "Gk)vernment  contract"  means  (a)  a 
contract  made  with  the  United  States,  or  with  any 
department,  bureau,  officer,  commission,  board,  or 
agency,  under  the  United  States  and  acting  in  its 
behalf,  or  with  any  agency  controlled  by  any  of  the 
above  if  the  contract  is  for  the  benefit  of  the  United 
States,  or  (b)  a  subcontract  made  with  a  contractor 
performing  such  a  contract  if  the  products  or  serv- 
ices to  be  furnished  under  the  subcontract  are  for 
the  benefit  of  the  United  States.  The  term  "Gov- 
ernment contract  or  contracts  made  between  April 
6,  1917,  and  November  11,  1918,  both  dates  inclu- 
sive" when  applied  to  a  contract  of  the  kind  referred 
to  in  clause  (a)  of  this  paragraph,  includes  all  such 
contracts  which,  although  entered  into  during  such 
period,  were  originally  not  enforceable,  but  which 
have  been  or  may  become  enforceable  by  reason  of 
subsequent  validation  in  pursuance  of  law; 


Gexeral    Dbfixitioxs 

The  term  "military  or  naval  forces  of  the  United  Military  or  naval 
States"   includes    the    Marine    Corps,    the    Coast  f<»^«sofu.s. 
Guard,  the  Army  Nurse  Corps,  Female,  and  the 
Navy  Nurse  Corps,  Female,  but  this  shall  not  be 
deemed  to  exclude  other  units  otherwise  included 
within  such  term; 

The  term  "present  war"  means  the  war  in  which  Present  war 
the  United  States  is  now  engaged  against  the  Ger- 
man Government. 

For  the  purposes  of  this  Act  the  date  of  the  ter-  Terminatien  of  war 
mination  of  the  present  war  shall  be  fixed  by  proc- 
lamation of  the  President. 


Definitions 
Taxable  year 


Fiscal  year 


First  taxable  year 


Fiduciary 


Withholding  agent 


Personal  service 
corporation 


^      TITLE  II. 

Income   Tax    > 

PART  I.— GENERAL  PROVISIONS. 

Definitions. 

Sec.  200.  That  when  used  in  this  title— 
The  term  "taxable  year"  means  the  calendar  year, 
or  the  jSseal  year  ending  during  such  calendar  year, 
upon  the  basis  of  which  the  net  income  is  computed 
under  section  212  or  section  232.  The  term  **fiscal 
year"  means  an  accounting  period  of  twelve  months 
ending  on  the  last  day  of  any  month  other  than  De- 
cember. The  first  taxable  year,  to  be  called  the 
taxable  year  1918,  shall  be  the  calendar  year  1918 
or  any  fiscal  year  ending  during  the  calendar  year 
1918; 

The  term  "fiduciary"  means  a  guardian,  trustee, 
executor,  administrator,  receiver,  conservator,  or 
any  person  acting  in  any  fiduciary  capacity  for  anv 
person,  trust  or  estate ; 

The  term  "withholding  agent"  means  any  person 
required  to  deduct  and  withhold  any  tax  under  the 
provisions  of  section  221  or  section  237; 

The  term  "personal  service  corporation"  means  a 
corporation  whose  income  is  to  be  ascribed  primarily 
to  the  activities  of  the  principal  o^\Tiers  or  stock- 
holders who  are  themselves  regularly  engaged  in  the 
active  conduct  of  the  affairs  of  the  corporation  and 
in  which  capital  (whether  invested  or  borrowed)  is 
not  a  material  income-producing  factor;  but  does 
not  include  any  foreign  corporation,  nor  any  cor- 


Ik  COME    Tax  9 

poration  50  per  centum  or  more  of  whose  gross  in- 
come consists  either  ( 1 )  of  gains,  profits,  or  income 
derived  from  trading  as  a  principal,  or  ( 2 )  of  gains, 
profits,  commissions,  or  other  income,  derived  from 
a  Government  contract  or  contracts  made  between 
April  6,  1917,  and  November  11,  1918,  both  dates 
inclusive ; 

The  term  "paid,"  for  the  purposes  of  the  deduc-  P"<* 
tions  and  credits  under  this  title,  means  "paid  or 
accrued"  or  "paid  or  incurred,"  and  the  terms  "paid  Paid  or  accrued 
or  incurred"  and  "paid  or  accrued"  shall  be  con-  ^ 

strued  according  to  the  method  of  accounting  upon 
the  basis  of  which  the  net  income  is  computed  under 
section  212. 

Dividends. 

Sec.  201.    (a)   That  the  term  "dividend"  when  Diridends: 
used  in  this  title  (except  in  paragraph  (10)  of  sub- 
division (a)  of  section  234 )  means  (1)  anvdistribu-  ,,,   ,         ^ 

J     \  .11*^  (v  of  corporahons 

tion  made  by  a  corporation,  other  than  a  personal 
service  corporation,  to  its  shareholders  or  members, 
whether  in  cash  or  in  other  property  or  in  stock  of 
the  corporation,  out  of  its  earnings  or  profits  accu- 
mulated since  February  28,  1913,  or  (2)  any  such  (2)  of  personal 
distribution  made  by  a  personal  service  corporation  »««•▼»<:«  corporaHons 
out  of  its  earnings  or  profits  accumulated  since  Feb- 
ruary 28, 1913,  and  prior  to  January  1,  1918. 

(b)   Any  distribution  shall  be  deemed  to  have  Deemed  to  be  from 
been  made  from  earnings  or  profits  unless  all  earn-  ****^**  earnings 
ings  and  profits  have  first  been  distributed.     Any 
distribution  made  in  the  year  1918  or  any  year  there- 
after shall  be  deemed  to  have  been  made  from  earn- 
ings or  profits  accumulated  since  February  28, 1913, 
or,  in  the  case  of  a  personal  service  corporation, 
from  the  most  recently  accumulated  earnings  or 
profits;  but  any  earnings  or  profits  accumulated 
prior  to  March  1,  1913,  may  be  distributed  in  stock  fj^Jc^hlTois"''' 
dividends  or  otherwise,  exempt  from  the  tax,  after  exemrt*^    ' 


10 


Rev£ku£   Act 


Stock  diyidends 


liquidation  dividends, 
taxability  of 


Ratet  applicable  to 
stock  dividends 


Earnings  from  which 
distribution  is  made 


the  earnings  and  profits  accumulated  since  Febru- 
ary 28,  1913,  have  been  distributed. 

(c)  A  dividend  paid  in  stock  of  the  corporation 
shall  be  considered  income  to  the  amount  of  the 
earnings  or  profits  distributed.  Amounts  distrib- 
uted in  the  liquidation  of  a  corporation  shall  be 
treated  as  payments  in  exchange  for  stock  or  shares, 
and  any  gain  or  profit  realized  thereby  shall  be 
taxed  to  the  distributee  as  other  gains  or  profits. 

(d)  If  any  stock  dividend  (1)  is  received  by  a 
taxpayer  between  January  1  and  November  1, 1918, 
both  dates  inclusive,  or  (2)  is  during  such  period 
bona  fide  authorized  or  declared,  and  entered  on  the 
books  of  the  corporation,  and  is  received  by  a  tax- 
payer after  November  1,  1918,  and  before  the  ex- 
piration of  thirty  days  after  the  passage  of  this  act, 
then  such  dividend  shall,  in  the  manner  provided  in 
section  206,  be  taxed  to  the  recipient  at  the  rates 
prescribed  by  law  for  the  years  in  which  the  corpora- 
tion accumulated  the  earnings  or  profits  from  which 
such  dividend  was  paid,  but  the  dividend  shall  be 
deemed  to  have  been  paid  from  the  most  recently 
accumulated  earnings  or  profits. 

(e)  Any  distribution  made  during  the  first  sixty 
days  of  any  taxable  year  shall  be  deemed  to  have 
been  made  from  earnings  or  profits  accumulated 
during  preceding  taxable  years;  but  any  distribu- 
tion made  during  the  remainder  of  the  taxable  year 
shall  be  deemed  to  have  been  made  from  earnings 
or  profits  accumulated  between  the  close  of  the  pre- 
ceding taxable  year  and  the  date  of  distribution,  to 
the  extent  of  such  earnings  or  profits,  and  if  the 
books  of  the  corporation  do  not  show  the  amount  of 
such  earnings  or  profits,  the  earnings  or  profits  for 
the  accounting  period  within  which  the  distribution 
was  made  shall  be  deemed  to  have  been  accumulated 
ratably  during  such  period. 


IncomeTax  ** 

Basis  For  Determining  Gain  or  Loss. 

Sec.  202  (a).  That  for  the  purpose  of  ascertain-  Sale  of  property: 
ing  the  gain  derived  or  loss  sustained  from  the  sale 
or  other  disposition  of  property,  real,  personal,  or 
mixed,  the  basis  shall  be — 

(1)  In  the  case  of  property  acquired  before  ^^;^7f^^^^ 
March  1,  1913,  the  fair  market  price  or  value  of 

such  property  as  of  that  date;  and 

(2)  In  the  case  of  property  acquired  on  or  after  ^^^^^^  ^^ 
that  date,  the  cost  thereof;  or  the  inventory  value, 

if  the  inventory  is  made  in  accordance  with  section 

203. 

(b)  When  property  is  exchanged  for  other  prop-  ^xchango  of  property 
erty,  the  property  received  in  exchange  shall  for  the 
purpose  of  determining  gain  or  loss  be  treated  as 
the  equivalent  of  cash  to  the  amount  of  its  fair  m^r-  ^^^^^^^^^^^^  ^^ 
ket  value,  if  any;  but  when  m  connection  with  the  ge„.ndcon«oiid.tioni 
reorganization,  merger,  or  consolidation  of  a  cor- 
poration a  person  receives  in  place  of  stock  or  secur- 
ities owned  by  him  new  stock  or  securities  of  no 
greater  aggregate  par  or  face  value,  no  gain  or  loss 
shall  be  deemed  to  occur  from  the  exchange,  and  the 
new  stock  or  securities  received  shall  be  treated  as 
taking  the  place  of  the  stock,  securities,  or  property 
exchanged. 

When  in  the  case  of  any  such  reorganization,  .^^^^^J^* 
merger  or  consolidation  the  aggregate  par  or  face 
value  of  the  new  stock  or  securities  received  is  in 
excess  of  the  aggregate  par  or  face  value  of  the  stock 
or  securities  exchanged,  a  like  amount  in  par  or  face 
value  of  the  new  stock  or  securities  received  shall  be 
treated  as  taking  the  place  of  the  stock  or  securities 
exchanged,  and  the  amount  of  the  excess  in  par  or 
face  value  shall  be  treated  as  a  gain  to  the  extent 
that  the  fair  market  value  of  the  new  stock  or  securi- 
ties is  greater  than  the  cost  (or  if  acquired  prior  to 


13 


R  E  VE  K  UE     A  CT 


Inventories  basis  of 


Net  losses: 

(1)  from  business 
operations 

(2)  from  sale  of  war- 
production  plant  and 
equipment 


Net  loss  defined 


Deduction  of  net 
losses 


March  1, 1913,  the  fair  market  value  as  of  that  date) 
of  the  stock  or  securities  exchanged. 

Inventories. 

Sec.  203.  That  whenever  in  the  opinion  of  the 
Commissioner  the  use  of  inventories  is  necessary  in 
order  clearly  to  determine  the  income  of  any  tax- 
payer, inventories  shall  be  taken  by  such  taxpayer 
upon  such  basis  as  the  Commissioner,  \vith  the  ap- 
proval of  the  Secretary,  may  prescribe  as  conform- 
ing as  nearly  as  may  be  to  the  best  accounting  prac- 
tice in  the  trade  or  business  and  as  most  clearly 
reflecting  the  income. 

Net  Losses. 

Sec.  204  (a)  That  as  used  in  this  section  the  term 
"net  loss"  refers  only  to  net  losses  resulting  from 
either  (1)  the  operation  of  any  business  regularly 
carried  on  by  the  taxpayer,  or  (2)  the  bona  fide 
sale  by  the  taxpayer  of  plant,  buildings,  machinery, 
equipment  or  other  facilities,  constructed,  installed 
or  acquired  by  the  taxpayer  on  or  after  April  6, 
1917,  for  the  production  of  articles  contributing  to 
the  prosecution  of  the  present  war;  and  when  so 
resulting  means  the  excess  of  the  deductions  allowed 
by  law  (excluding  in  the  case  of  corporations 
amounts  allowed  as  a  deduction  under  paragraph 
(6)  of  subdivision  (a)  of  section  234 )  over  the  sum 
of  the  gross  income  plus  any  interest  received  free 
from  taxation  both  under  this  title  and  under  Title 
III. 

(b)  If  for  any  taxable  year  beginning  after 
October  31,  1918,  and  ending  prior  to  January  1, 
1920,  it  appears  upon  the  production  of  evidence 
satisfactory  to  the  Commissioner  that  any  taxpayer 
has  sustained  a  net  loss,  the  amount  of  such  net  loss 
shall  under  regulations  prescribed  by  the  Commis- 


I  N  COME   Tax  18 

sioner  with  the  approval  of  the  Secretary  be  de- 
ducted from  the  net  income  of  the  taxpayer  for  the 
preceding  taxable  year ;  and  the  taxes  imposed  bv  „  j       .    .      , 

7i  •      ••■1  11        m«.  1      TTT    n  -,  T.  Kedelerminabon  of 

this  title  and  by  Title  III  for  such  preceding  tax-  tax 
able  year  shall  be  redetermined  accordingly.  Any 
amount  found  to  be  due  to  the  taxpayer  upon  the 
basis  of  such  redetermination  shall  be  credited  or 
refunded  to  the  taxpayer  in  accordance  with  the 
provisions  of  section  252.  If  such  net  loss  is  in 
excess  of  the  net  income  for  such  preceding  taxable 
year,  the  amount  of  such  excess  shall  under  regu- 
lations prescribed  by  the  Commissioner  with  the 
approval  of  the  Secretary  be  allowed  as  a  deduction 
in  computing  the  net  income  for  the  succeeding 
taxable  year. 

(c)   The  benefit  of  this  section  shall  be  allowed  Net  losses  of  part- 
to  the  members  of  a  partnership  and  the  beneficiaries  "«"*"p«  *"<*  ««*»*•» 
of  an  estate  or  trust  under  regulations  prescribed  by 
the  Commissioner  with  the  approval  of  the  Secre- 
tary. 

Fiscal  Year  With  Di£Ferent  Rates. 

Sec.  205.  (a)  That  if  a  taxpayer  makes  return  Tax  for  fiscal  year 
for  a  fiscal  year  beginning  in  1917  and  ending  in  ^£"„^J9,8^^^""'* 
1918,  his  tax  under  this  title  for  the  first  taxable  year 
shall  be  the  sum  of:  (1)  the  same  proportion  of  a 
tax  for  the  entire  period  computed  under  Title  I  of 
the  Revenue  Act  of  1916  as  amended  by  the  Reve- 
nue Act  of  1917  and  under  Title  I  of  the  Revenue 
Act  of  1917,  which  the  portion  of  such  period  fall- 
ing within  the  calendar  year  1917  is  of  the  entire 
period,  and  (2)  the  same  proportion  of  a  tax  for  the 
H  entire  period  computed  under  this  title  at  the  rates 
for  the  calendar  year  1918  which  the  portion  of  such 
period  falling  within  the  calendar  year  1918  is  of  the 
entire  period ;  Provided,  That  in  the  cstse  of  a  per- 
sonal service  corporation  the  amount  to  be  paid 
shall  be  only  that  specified  in  clause  (1). 


u 


Re  v£ir  US    Act 


Credit  for  Ux  paid 
under  ReTenue  Acts 
of  1916  and  1917 


Tax  for  fiscal  year 
beginning  in  1918 
and  ending  in  1919 


Fiscal  year  of 
partnership 


Any  amount  heretofore  or  hereafter  paid  on  ac- 
count of  the  tax  imposed  for  such  fiscal  year  by  Title 
I  of  the  Revenue  Act  of  1916  as  amended  by  the 
Revenue  Act  of  1917,  and  by  Title  I  of  the  Revenue 
Act  of  1917,  shall  be  credited  towards  the  payment 
of  the  tax  imposed  for  such  fiscal  year  by  this  Act, 
and  if  the  amount  so  paid  exceeds  the  amount  of 
such  tax  imposed  by  this  Act,  or,  in  the  case  of  a 
personal  service  corporation,  the  amount  specified 
in  clause  (1),  the  excess  shall  be  credited  or  re- 
funded in  accordance  with  the  provisions  of  section 
252. 

(b)  If  a  taxpayer  makes  a  return  for  a  fiscal 
year  beginning  in  1918  and  ending  in  1919,  the  tax 
under  this  title  for  such  fiscal  year  shall  be  the  sum 
of:  (1)  the  same  proportion  of  a  tax  for  the  entire 
period  computed  under  this  title  at  the  rates  speci- 
fied for  the  calendar  year  1918  which  the  portion  of 
such  period  falling  within  the  calendar  year  1918 
is  of  the  entire  period,  and  (2)  the  same  proportion 
of  a  tax  for  the  entire  period  computed  under  this 
title  at  the  rates  specified  for  the  calendar  year  1919 
which  the  portion  of  such  period  falling  within  the 
calendar  year  1919  is  of  the  entire  period. 

(c)  If  a  fiscal  year  of  a  partnership  begins  in 
1917  and  ends  in  1918  or  begins  in  1918  and  ends  in 
1919,  then  notwithstanding  the  provisions  of  subdi- 
vision (b)  of  section  218,  (1)  the  rates  for  the  cal- 
endar year  during  which  such  fiscal  year  begins  shall 
apply  to  an  amount  of  each  partner's  share  of  such 
partnership  net  income  (determined  under  the  law 
applicable  to  such  year)  equal  to  the  proportion 
which  the  part  of  such  fiscal  year  falling  within  such 
calendar  year  bears  to  the  full  fiscal  year,  and  (2) 
the  rates  for  the  calendar  year  during  which  such 
fiscal  year  ends  shall  apply  to  an  amount  of  each 
partner's  share  of  such  partnership  net  income  (de- 


IkcomeTax  15 

termined  under  the  law  applicable  to  such  calendar 
year)  equal  to  the  proportion  which  the  part  of  such 
fiscal  year  falhng  within  such  calendar  year  bears 
to  the  full  fiscal  year ;  Provided,  That  in  the  case  of 
a  personal  service  corporation  with  respect  to  a  fiscal 
year  beginning  in  1917  and  ending  in  1918,  the 
amount  specified  in  clause  (1)  shall  not  be  subject 
to  normal  tax. 

Parts  of  Income  Subject  to  Rates  for 
Different  Years 

Sec  206.     That  whenever  parts  of  a  taxpayer's  Method  of  applying 
income  are  subject  to  rates  for  different  calendar  »« rate*  to  allocated 
years,  the  part  subject  to  the  rates  for  the  most 
recent  calendar  year  shall  be  placed  in  the  lower 
brackets  of  the  rate  schedule  provided  in  this  title, 
the  part  subject  to  the  rates  for  the  next  preceding 
calendar  year  shall  be  placed  in  the  next  higher 
brackets  of  the  rate  schedule  applicable  to  that  year, 
^nd  so  on  until  the  entire  net  income  has  been  ac- 
counted for.     In  determining  the  income,  any  de-  Method  of  applying 
ductions,  exemptions  or  credits  of  a  kind  not  plainly  deductions 
and  properly  chargeable  against  the  income  taxable 
at  rates  for  a  preceding  year  shall  first  be  applied 
against  the  income  subject  to  rates  for  the  most 
recent  calendar  year;  but  any  balance  thereof  shall 
be  applied  against  the  income  subject  to  the  rates 
of  the  next  preceding  year  or  years  until  fully  al- 
lowed. 


PART  IL— INDIVIDUALS. 

Normal  Tax. 

Sec.  210.  That,  in  lieu  of  the  taxes  imposed  by 
subdivision  (a)  of  section  1  of  the  Revenue  Act  of 
1916  and  by  section  1  of  the  Revenue  Act  of  1917, 
there  shall  be  levied,  collected,  and  paid  for  each 


Normal  tax  on 
indiyiduals 


16 


RxvsyuE   Act 


Rates  for  1918 


Rates  for  succeeding 
years 


Surtax  rates 


taxable  year  upon  the  net  income  of  every  individual 
^  normal  tax,  at  the  following  rates  :* 

(a)  For  the  calendar  year  1918,  12  per  centum 
of  the  amount  of  the  net  income  in  excess  of  the 
credits  provided  in  section  216;  Provided,  That 
in  the  case  of  a  citizen  or  resident  of  the  United 
States  the  rate  upon  the  first  $4,000  of  such  excess 
amount  shall  be  6  per  centum; 

(b)  For  each  calendar  year  thereafter,  8  per 
centum  of  the  amount  of  the  net  income  in  excess  of 
the  credits  provided  in  section  216;  Provided,  That 
in  the  case  of  a  citizen  or  resident  of  the  United 
States  the  rate  upon  the  first  $4,000  of  such  excess 
amount  shall  be  4  per  centum. 

Surtax. 

Sec.  211.  (a)  That,  in  lieu  of  the  taxes  im- 
posed by  subdivision  (b)  of  section  1  of  the  Revenue 
Act  of  1916  and  by  section  2  of  the  Revenue  Act 
of  1917,  but  in  addition  to  the  normal  tax  imposed 
by  section  210  of  this  Act,  there  shall  be  levied,  col- 
lected, and  paid  for  each  taxable  year  upon  the  net 
income  of  every  individual,  a  surtax  equal  to  the  sum 
of  the  following:* 

1  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $5,000  and  does  not  exceed  $6,000; 

2  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $6,000  and  does  not  exceed  $8,000; 

3  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $8,000  and  does  not  exceed  $10,000; 

4  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $10,000  and  does  not  exceed  $12,000; 

5  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $12,000  and  does  not  exceed  $14,000; 


*See  table,  pa^i  215. 


Ikcome   Tax  ^"^ 

6  per  centum  of  the  amount  by  which  the  net  in-  Surtax  rate« 
come  exceeds  $14,000  and  does  not  exceed  $16,000;  *^®"**""® 

7  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $16,000  and  does  not  exceed  $18,000; 

8  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $18,000  and  does  not  exceed  $20,000; 

9  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $20,000  and  does  not  exceed  $22,000; 

10  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $22,000  and  does  not  exceed  $24,000 ; 

11  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $24,000  and  does  not  exceed  $26,000; 

12  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $26,000  and  does  not  exceed  $28,000; 

13  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $28,000  and  does  not  exceed  $30,000; 

14  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $30,000  and  does  not  exceed  $32,000; 

15  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $32,000  and  does  not  exceed  $34,000 ; 

16  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $34,000  and  does  not  exceed  $36,000; 

17  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $36,000  and  does  not  exceed  $38,000; 

18  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $38,000  and  does  not  exceed  $40,000;  . 

19  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $40,000  and  does  not  exceed  $42,000 ; 

20  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $42,000  and  does  not  exceed  $44,000 ; 

21  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $44,000  and  does  not  exceed  $46,000 ; 

22  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $46,000  and  does  not  exceed  $48,000 ; 

23  per  centimi  of  the  amount  by  which  the  net  in- 
come exceeds  $48,000  and  does  not  exceed  $50,000; 


18  llsVEliUBACT 

Surtax  raici  24  per  cciitum  of  the  amount  by  which  the  net  in 

conUnucd  ^^^^  exeeeds  $50,000  and  does  not  exceed  $52,000 

25  per  centum  of  the  amount  by  which  the  net  in 
come  exceeds  $52,000  and  does  not  exceed  $54,000 

26  per  centum  of  the  amount  by  which  the  net  in 
come  exceeds*  $54,000  and  does  not  exceed  $56,000 

27  per  centum  of  the  amount  by  which  the  net  in 
come  exceeds  $56,000  and  does  not  exceed  $58,000 

28  per  centum  of  the  amount  by  which  the  net  in 
come  exceeds  $58,000  and  does  not  exceed  $60,000 

29  per  centum  of  the  amount  by  which  the  net  in 
come  exceeds  $60,000  and  does  not  exceed  $62,000 

30  per  centum  of  the  amount  by  which  the  net  in 
come  exceeds  $62,000  and  does  not  exceed  $64,000 

31  per  centum  of  the  amount  by  which  the  net  in 
come  exceeds  $64,000  and  does  not  exceed  $66,000 

32  per  centum  of  the  amount  by  which  the  net  in 
come  exceeds  $66,000  and  does  not  exceed  $68,000 

33  per  centum  of  the  amount  by  which  the  net  in 
come  exceeds  $68,000  and  does  not  exceed  $70,000 

34  per  centum  of  the  amount  by  which  the  net  in 
come  exceeds  $70,000  and  does  not  exceed  $72,000 

35  per  centum  of  the  amount  by  which  the  net  in 
come  exceeds  $72,000  and  does  not  exceed  $74,000 

36  per  centum  of  the  amount  by  which  the  net  in 
come  exceeds  $74,000  and  does  not  exceed  $76,000 

37  per  centum  of  the  amount  by  which  the  net  in 
come  exceeds  $76,000  and  does  not  exceed  $78,000 

38  per  centimi  of  the  amount  by  which  the  net  in 
come  exceeds  $78,000  and  does  not  exceed  $80,000 

39  per  centum  of  the  amount  by  which  the  net  in 
come  exceeds  $80,000  and  does  not  exceed  $82,000 

40  per  centum  of  the  amount  by  which  the  net  in 
come  exceeds  $82,000  and  does  not  exceed  $84,000 

41  per  centum  of  the  amount  by  which  the  net  in 
come  exceeds  $84,000  and  does  not  exceed  $86,000 


IifcoME   Tax 


19 


42  per  centum  of  the  amount  by  which  the  net  in-  Surtax  rates 
come  exceeds  $86,000  and  does  not  exceed  $88,000;  ^«"*'""«*' 

43  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $88,000  and  does  not  exceed  $90,000 ; 

44  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $90,000  and  does  not  exceed  $92,000; 

45  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $92,000  and  does  not  exceed  $94,000; 

46  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $94,000  and  does  not  exceed  $96,000 ; 

47  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $96,000  and  does  not  exceed  $98,000 ; 

48  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $98,000  and  does  not  exceed  $100,000; 

52  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $100,000  and  does  not  exceed  $150,- 
000 ; 

56  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $150,000  and  does  not  exceed  $200,- 
>00; 

60  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $200,000  and  does  not  exceed  $300,- 
[OOO; 

63  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $300,000  and  does  not  exceed  $500,- 
>00 ; 

64  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $500,000  and  does  not  exceed  $1,000,- 
000; 

65  per  centum  of  the  amount  by  which  the  net  in- 
come exceeds  $1,000,000. 

(b)    In  the  case  of  a  bona  fide  sale  of  mines,  oil  Mines  and  wells, 
or  ffas  wells,  or  any  interest  therein,  where  the  prin-  :'""  **  *?  **  '^''i  ^"s 

.*^'»'  111  1    income  from  sale  ol 

cipal  value  of  the  property  has  been  demonstrated 
by  prospecting  or  exploration  and  discovery  work 
done  by  the  taxpayer,  the  portion  of  the  tax  imposed 


20 


Re  vcK  UE    Act 


Net  income  defined 


Accounting  period 


Accounting  methods 


Changes  in  accounting 
period 


Income  subject 
to  tax 


by  this  section  attributable  to  such  sale  shall  not  ex- 
ceed 20  per  centum  of  the  selUng  price  of  such  prop- 
erty or  interest. 

Net  Income  Defined. 

Sec.  212.»(a)  That  in  the  case  of  an  individual 
the  term  "net  income"  means  the  gross  income  as 
defined  in  section  213,  less  the  deductions  allowed  by 
section  214. 

(b)  The  net  income  shall  be  computed  upon  the 
basis  of  the  taxpayer's  annual  accounting  period 
(fiscal  year  or  calendar  year,  as  the  case  may  be)  in 
accordance  with  the  method  of  accounting  regularly 
employed  in  keeping  the  books  of  such  taxpayer; 
but  if  no  such  method  of  accounting  has  been  so  em- 
ployed, or  if  the  method  employed  does  not  clearly 
reflect  the  income,  the  computation  shall  be  made 
upon  such  basis  and  in  such  manner  as  in  the  opinion 
of  the  Commissioner  does  clearly  reflect  the  income. 
If  the  taxpayer's  annual  accounting  period  is  other 
than  a  fiscal  year  as  defined  in  section  200  or  if  the 
taxpayer  has  no  annual  accounting  period  or  does 
not  keep  books,  the  net  income  shall  be  computed  on 
the  basis  of  the  calendar  year. 

If  a  taxpayer  changes  his  accounting  period  from 
fiscal  year  to  calendar  year,  from  calendar  year  to 
fiscal  year,  or  from  one  fiscal  year  to  another,  the 
net  income  shall,  with  the  approval  of  the  Commis- 
sioner, be  computed  on  the  basis  of  such  new  ac- 
counting period,  subject  to  the  provisions  of  section 
226. 

Gross  Income  Defined. 

Sec.  213.  That  for  the  purposes  of  this  title  (ex- 
cept as  otherwise  provided  in  section  233)  the  term 
"gross  income" — 

(a)  Includes  gains,  profits,  and  income  derived 
from  salaries,  wages,  or  compensation  for  personal 


IncomeTax  21 

service  (including  in  the  case  of  the  President  of  the 
United  States,  the  judges  of  the  Supreme  and  In- 
ferior Courts  of  the  United  States,  and  all  other 
officers  and  employees,  whether  elected  or  ap- 
pointed, of  the  United  States,  Alaska,  Hawaii,  or 
any  political  subdivision  thereof,  or  the  District  of 
Columbia,  the  compensation  received  as  such),  of 
whatever  kind  and  in  whatever  form  paid,  or  from 
professions,  vocations,  trades,  businesses,  commerce, 
or  sales,  or  dealings  in  property,  whether  real  or 
personal,  growing  out  of  the  ownership  or  use  of 
or  interest  in  such  property ;  also  from  interest,  rent, 
dividends,  securities,  or  the  transaction  of  any  busi- 
ness carried  on  for  gain  or  profit,  or  gains  or  profits 
and  income  derived  from  any  source  whatever.  The 
amount  of  all  such  items  shall  be  included  in  the 
gross  income  for  the  taxable  year  in  which  received 
by  the  taxpayer,  unless,  under  methods  of  account- 
ing permitted  under  subdivision  (b)  of  section  212, 
any  such  amounts  are  to  be  properly  accounted  for 
as  of  a  different  period;  but 

(b)  Does  not  include  the  following  items,  which  Jnc®*"®  e'^^'^pi 
shall  be  exempt  from  taxation  under  this  title: 

(1)  The  proceeds  of  Ufe  insurance  policies  paid  P'*®ceeds  of  Ufe 
upon  the  death  of  the  insured  to  individual  benefi- 
ciaries or  to  the  estate  of  the  insured; 

(2)  The  amount  received  by  the  insured  as  a  re-  Return  of  life 
turn  of  premium  or  premiums  paid  by  him  under  »"»"*^*nce  p^®™'"'"^ 
life  insurance,  endowment,  or  annuity  contracts, 

either  during  the  term  or  at  the  maturity  of  the  term 
mentioned  in  the  contract  or  upon  surrender  of  the 
contract ; 

(3)  The  value  of  property  acquired  by  gift,  be-  G'fi*  and  Quests 
quest,  devise,  or  descent  (but  the  income  from  such 
property  shall  be  included  in  gross  income) ; 

(4)  Interest  upon  (a)  the  obligations  of  a  State, 
Territory,  or  any  political  subdivision  thereof,  or 


22 


Revenue    Act 


Interest  on  State, 
Municipal,  Federal 
Farm  Loan,  U.  S.  and 
War  Finance  Corpor- 
ation bonds 


Exemption  limited 


Income  of  foreign 
governments 


Compensation 
under  workmen's  com- 
pensation acts 


Income  of  political 
subdivisions  of  the 
U.S. 


the  District  of  Columbia;  or  (b)  securities  issued 
under  the  provisions  of  the  Federal  Farm  Loan  Act 
of  July  17,  1916;  or  (c)  the  obligations  of  the 
United  States  or  its  possessions;  or  (d)  bonds  issued 
by  the  War^Finance  Corporation ;  Provided,  That 
every  person  owning  any  of  the  obligations,  securi- 
ties or  bonds  enumerated  in  clauses  (a),  (b),  (c), 
and  (d)  shall,  in  the  return  required  by  this  title, 
submit  a  statement  showing  the  number  and  amount 
of  such  obUgations,  securities  and  bonds  owned  by 
him  and  the  income  received  therefrom,  in  such  form 
and  with  such  information  as  the  Commissioner 
may  require.  In  the  case  of  obligations  of  the 
United  States  issued  after  September  1,  1917,  and 
in  the  case  of  bonds  issued  by  the  War  Finance 
Corporation,  the  interest  shall  be  exempt  only  if 
and  to  the  extent  provided  in  the  respective  Acts 
authorizing  the  issue  thereof  as  amended  and  sup- 
plemented, and  shall  be  excluded  from  gross  income 
only  if  and  to  the  extent  it  is  wholly  exempt  from 
taxation  to  the  taxpayer  both  under  this  title  and 
under  Title  III; 

(5)  The  income  of  foreign  govermnents  re- 
ceived from  investments  in  the  United  States  in 
stocks,  bonds,  or  other  domestic  securities,  o^vned 
by  such  foreign  governments,  or  from  interest  on 
deposits  in  banks  in  the  United  States  of  moneys 
belonging  to  such  foreign  governments,  or  from  any 
other  source  within  the  United  States; 

(6)  Amounts  received,  through  accident  or 
health  insurance  or  under  workmen's  compensation 
acts,  as  compensation  for  personal  injuries  or  sick- 
ness, plus  the  amount  of  any  damages  received 
whether  by  suit  or  agreement  on  account  of  such 
injuries  or  sickness; 

(7)  Income  derived  from  any  pubhc  utility  or 
the  exercise  of  any  essential  governmental  function 


IncomeTax  2S 

and  accruing  to  any  State,  Territory,  or  the  District 
of  Columbia,  or  any  political  subdivision  of  a  State 
or  Territory,  or  income  accruing  to  the  government 
of  any  possession  of  the  United  States,  or  any  polit- 
ical subdivision  thereof. 

Whenever  any  State,  Territory,  or  the  District  income  from  public 
of  Columbia,  or  any  political  subdivision  of  a  State  burde^n  poUtkal" 
or  Territory,  prior  to  September  8,  1916,  entered  subdivisions 
in  good  faith  into  a  contract  with  any  person, 
the  object  and  purpose  of  which  is  to  acquire,  con- 
struct, operate,  or  maintain  a  pubhc  utility,  no  tax 
shall  be  levied  under  the  provisions  of  this  title  upon 
the  income  derived  from  the  operation  of  such  public 
utiUty,  so  far  as  the  payment  thereof  will  impose  a 
loss  or  burden  upon  such  State,  Territory,  District 
of  Columbia,  or  political  subdivision;  but  this  pro- 
vision is  not  intended  to  confer  upon  such  person 
any  financial  gain  or  exemption  or  to  reheve  such 
person  from  the  payment  of  a  tax  as  provided  for 
in  this  title  upon  the  part  or  portion  of  such  income 
to  which  such  person  is  entitled  under  such  contract ; 

(8)  So  much  of  the  amount  received  during  the  Compensation  of 
present  war  by  a  person  in  the  military  or  naval  Pf^sons  m  active  ser- 

f'  i?j.iTr-4.JC'4-i.  1  vice  during  present 

lorces  ot  the  United  htates  as  salary  or  compensa-  ^„ 
tion  in  any  form  from  the  United  States  for  active 
services  in  such  forces  as  does  not  exceed  $3,500. 

(c)  In  the  case  of  nonresident  alien  individuals.  Nonresident  aliens, 
gross  income  includes  only  the  gross  income  from  g«^oss  income  of 
sources  within  the  United  States,  including  interest 
on  bonds,  notes,  or  other  interest- bearing  obliga- 
tions of  residents,  corporate  or  otherwise,  dividends 
from  resident  corporations,  and  including  all 
amounts  received  (although  paid  under  a  contract 
for  the  sale  of  goods  or  otherwise)  representing 
profits  on  the  manufacture  and  disposition  of  goods 
within  the  United  States. 


24 


Re VEKUE   Act 


Deductions: 


Business  expenses 


Interest 


Taxes  psid  or  accrued 
in  taxable  year 


Deductions  Allowed. 

Sec.  214.  (a)  That  in  computing  net  income  there 
shall  be  allowed  as  deductions : 

(1)  All  the  ordinary  and  necessary  expenses  paid 
or  incurred  during  the  taxable  year  in  carrying  on 
any  trade  or  business,  including  a  reasonable  allow- 
ance for  salaries  or  other  compensation  for  personal 
services  actually  rendered,  and  including  rentals  or 
other  pajrments  required  to  be  made  as  a  condition 
to  the  continued  use  or  possession,  for  purposes  of 
the  trade  or  business,  of  property  to  which  the  tax- 
payer has  not  taken  or  is  not  taking  title  or  in  which 
he  has  no  equity; 

(2)  All  interest  paid  or  accrued  within  the  tax- 
able year  on  indebtedness,  except  on  indebtedness 
incurred  or  continued  to  purchase  or  carry  obhga- 
tions  or  securities  (other  than  obligations  of  the 
United  States  issued  after  September  24,  1917), 
the  interest  upon  which  is  wholly  exempt  from  tax- 
ation under  this  title  as  income  to  the  taxpayer,  or, 
in  the  case  of  a  nonresident  alien  individual,  the  pro- 
portion of  such  interest  which  the  amount  of  his 
gross  income  from  sources  within  the  United  States 
bears  to  the  amount  of  his  gross  income  from  all 
sources  within  and  without  the  United  States; 

(3)  Taxes  paid  or  accrued  within  the  taxable 
year  imposed  (a)  by  the  authority  of  the  United 
States,  except  income,  war  profits  and  excess-profits 
taxes;  or  (b)  by  the  authority  of  any  of  its  posses- 
sions, except  the  amount  of  income,  war  profits  and 
excess-profits  taxes  allowed  as  a  credit  under  sec- 
tion 222;  or  (c)  by  the  authority  of  any  State  or 
Territory,  or  any  county,  school  district,  municipal- 
ity, or  other  taxing  subdivision  of  any  State  or  Ter- 
ritory, not  including  those  assessed  against  local 
benefits  of  a  kind  tending  to  increase  the  value  of  the 
property  assessed;  or  (d)  in  the  case  of  a  citizen  or 


IncomeTax  26 

resident  of  the  United  States,  by  the  authority  of 
any  foreign  country,  except  the  amount  of  income, 
war-profits  and  excess-profits  taxes  allowed  as  a 
credit  under  section  222;  or  (e)  in  the  case  of 
a  nonresident  alien  individual,  by  the  authority  of 
any  foreign  country  (except  income,  war-profits 
and  excess-profits  taxes,  and  taxes  assessed  against 
local  benefits  of  a  kind  tending  to  increase  the  value 
of  the  property  assessed),  upon  property  or  busi- 
ness; 

(4)  Losses  sustained  during  the  taxable  year  Losses 
and  not  compensated  for  by  insurance  or  otherwise, 

if  incurred  in  trade  or  business ; 

(5)  Losses  sustained  during  the  taxable  year  Losses  not  con- 
and  not  compensated  for  by  insurance  or  otherwise,  nected  with  trade 
if  incurred  in  any  transaction  entered  into  for  profit, 

though  not  connected  with  the  trade  or  business ;  but 
in  the  case  of  a  nonresident  alien  individual  only  as 
to  such  transactions  vdthin  the  United  States; 

(6)  Losses  sustained  during  the  taxable  year  of  Losses  from  fire, 
property  not  connected  with  the  trade  or  business  ca*"»i*y»  ^^^^^*  «tc- 
(but  in  the  case  of  a  nonresident  alien  individual 

only  property  within  the  United  States)  if  arising 
from  fires,  storms,  shipwreck,  or  other  casualty,  or 
from  theft,  and  if  not  compensated  for  by  insurance 
or  otherwise; 

(7)  Debts    ascertained    to    be    worthless    and  Worthless  debts 
charged  off  within  the  taxable  year ; 

(8)  A  reasonable  allowance  for  the  exhaustion,  Depreciation  and 
wear  and  tear  of  property  used  in  the  trade  or  busi-  obso'^cence 
ness,  including  a  reasonable  allowance  for  obsoles- 
cence ; 

(9)  In  the  case  of  buildings,  machinery,  equip-  AmorHzation  of 
ment,  or  other  facilities,  constructed,  erected,  in-  faoJtJef  f"'' ^ar 
stalled,  or  acquired,  on  or  after  April  6,  1917,  for 

the  production  of  articles  contributing  to  the  prose- 
cution of  the  present  war,  and  in  the  case  of  vessels 


26 


R  E  VE  X  UE    A<:t 


Depletion  of 
mineral  resources  or 
timber 


constructed  or  acquired  on  or  after  such  date  for 
the  transportation  of  articles  or  men  contributing 
to  the  prosecution  of  the  present  war,  there  shall  be 
allowed  a  reasonable  deduction  for  the  amortization 
of  such  part^of  the  cost  of  such  facilities  or  vessels 
as  has  been  borne  by  the  taxpayer,  but  not  again  in- 
cluding any  amount  otherwise  allowed  under  this 
title  or  previous  Acts  of  Congress  as  a  deduction  in 
computing  net  income.  At  any  time  within  three 
years  after  the  termination  of  the  present  war,  the 
Commissioner  may,  and  at  the  request  of  the  tax- 
payer shall,  reexamine  the  return,  and  if  he  then 
finds  as  a  result  of  an  appraisal  or  from  other  evi- 
dence that  the  deduction  originally  allowed  was  in- 
correct, the  taxes  imposed  by  this  title  and  by  Title 
III  for  the  year  or  years  affected  shall  be  redeter- 
mined; and  the  amount  of  tax  due  upon  such  rede- 
termination, if  any,  shall  be  paid  upon  notice  and 
demand  by  the  collector,  or  the  amount  of  tax  over- 
paid, if  any,  shall  be  credited  or  refunded  to  the  tax- 
payer in  accordance  with  the  provisions  of  section 
252; 

(10)  In  the  case  of  mines,  oil  and  gas  wells,  other 
natural  deposits,  and  timber,  a  reasonable  allow- 
ance for  depletion  and  for  depreciation  of  improve- 
ments, according  to  the  peculiar  conditions  in  each 
case,  based  upon  cost  including  cost  of  development 
not  otherwise  deducted ;  Provided,  That  in  the  case 
of  such  properties  acquired  prior  to  March  1,  1913, 
the  fair  market  value  of  the  property  (or  the  tax- 
payer's interest  therein)  on  that  date  shall  be  taken 
in  lieu  of  cost  up  to  that  date;  Provided  further. 
That  in  the  case  of  mines,  oil  and  gas  wells,  discov- 
ered by  the  taxpayer,  on  or  after  INIarch  1,  1913, 
and  not  acquired  as  the  result  of  purchase  of  a 
proven  tract  or  lease,  where  the  fair  market  value 
of  the  property  is  materially  disproportionate  to 


IncomeTax  27 

the  cost,  the  depletion  allowance  shall  be  based  upon 
the  fair  market  value  of  the  property  at  the  date 
of  the  discovery,  or  within  thirty  days  thereafter; 
such  reasonable  allowance  in  all  the  above  cases  to 
be  made  under  rules  and  regulations  to  be  pre- 
scribed by  the  Commissioner  with  the  approval  of 
the  Secretary.  In  the  case  of  leases  the  deductions 
allowed  by  this  paragraph  shall  be  equitably  appor- 
tioned between  the  lessor  and  lessee; 

( 11 )  Contributions  or  gifts  made  within  the  tax-  Contributions  and 
able  year  to  corporations  organized  and  operated  ^•^** 
exclusively  for  rehgious,  charitable,  scientific,  or 
educational  purposes,  or  for  the  prevention  of 
cruelty  to  children  or  animals,  no  part  of  the  net 
earnings  of  which  inures  to  the  benefit  of  any  pri- 
vate stockholder  or  individual,  or  to  the  special  fund 
for  vocational  rehabilitation  authorized  by  section 
7  of  the  Vocational  Rehabilitation  Act,  to  an 
amount  not  in  excess  of  15  per  centum  of  the  tax- 
payer's net  income  as  computed  without  the  benefit 
of  this  paragraph.  Such  contributions  or  gifts  shall 
be  allowable  as  deductions  only  if  verified  under 
rules  and  regulations  prescribed  by  the  Commis- 
sioner, with  the  approval  of  the  Secretary.  In  the 
case  of  a  nonresident  alien  individual  this  deduction 
shall  be  allowed  only  as  to  contributions  or  gifts 
made  to  domestic  corporations,  or  to  such  vocational 
rehabilitation  fund ; 

(12)      (a)     At    the    time    of    filing    return    for    the   Claim  in  abatement: 

taxable  year  1918  a  taxpayer  may  file  a  claim  in 

abatement  based  on  the  fact  that  he  has  sustained  a 

substantial  loss  (whether  or  not  actually  realized  by 

sale  or  other  disposition)  resulting  from  any  ma-  l^„  f^om  shrinkage 

terial  reduction  (not  due  to  temporary  fluctuation)  of  inventory  value* 

of  the  value  of  the  inventory  for  such  taxable  year, 

or  from  the  actual  payment  after  the  close  of  such  Loss  from  payment  of 

taxable  year  of  rebates  in  pursuance  of  contracts  rebate 


28 


Revenue   Act 


Security 


Deduction  of  net 
lots 


Redetermination  of 
tax  in  case  no  claim 
has  been  filed 


Nonresident  aliens: 
deductions  allowed 
only  to  extent  con- 
nected with  income 
from  U.  S. 


entered  into  during  such  year  upon  sales  made  dur- 
ing such  year.  In  such  case  payment  of  the  amount 
of  the  tax  covered  by  such  claim  shall  not  be  re- 
quired until  the  claim  is  decided,  but  the  taxpayer 
shall  accomp5,ny  his  claim  with  a  bond  in  double 
the  amount  of  the  tax  covered  by  the  claim,  with 
sureties  satisfactory  to  the  Commissioner,  condi- 
tioned for  the  payment  of  any  part  of  such  tax 
found  to  be  due,  with  interest.  If  any  part  of  such 
claim  is  disallowed  then  the  remainder  of  the  tax 
due  shall  on  notice  and  demand  by  the  collector  be 
paid  by  the  taxpayer  with  interest  at  the  rate  of  1 
per  centum  per  month  from  the  time  the  tax  would 
have  been  due  had  no  such  claim  been  filed.  If  it 
is  shown  to  the  satisfaction  of  the  Commissioner  that 
such  substantial  loss  has  been  sustained,  then  in 
computing  the  tax  imposed  by  this  title  the  amount 
of  such  loss  shall  be  deducted  from  the  net  income. 
(b)  If  no  such  claim  is  filed,  but  it  is  shown  to  the 
satisfaction  of  the  Commissioner  that  during  the 
taxable  year  1919  the  taxpayer  has  sustained  a  sub- 
stantial loss  of  the  character  above  described  then 
the  amount  of  such  loss  shall  be  deducted  from  the 
net  income  for  the  taxable  year  1918  and  the  tax 
imposed  by  this  title  for  such  year  shall  be  redeter- 
mined accordingly.  Any  amount  found  to  be  due 
to  the  taxpayer  upon  the  basis  of  such  redetermina- 
tion shall  be  credited  or  refunded  to  the  taxpayer 
in  accordance  with  the  provisions  of  section  252. 

(b)  In  the  case  of  a  nonresident  alien  individual 
the  deductions  allowed  in  paragraphs  (1),  (4), 
(7),  (8),  (9),  (10),  (12),  and  clause  (e)  of  para- 
graph (3),  of  subdivision  (a)  shall  be  allowed  only 
if  and  to  the  extent  that  thev  are  connected  with 
income  arising  from  a  source  within  the  United 
States;  and  the  proper  apportionment  and  alloca- 
tion of  the  deductions  with  respect  to  sources  of  in- 


IncomeTax  29 

come  within  and  without  the  United  States  shall  be 
determined  under  rules  and  regulations  prescribed 
by  the  Commissioner  with  the  approval  of  the  Secre- 
tary. 

Items  Not  Deductible. 

Sec.  215.    That  in  computing  net  income  no  de- 
duction shall  in  any  case  be  allowed  in  respect  of — 

(a)  Personal,  living,  or  family  expenses;  Uving expenses 

( b )  Any  amount  paid  out  for  new  buildings  or  Capital  invesimenu 
for  permanent  improvements  or  betterments  made 

to  increase  the  value  of  any  property  or  estate ; 

(c)  Any  amount  expended  in  restoring  property  Cosi  of  restoring 
or  in  making  good  the  exhaustion  thereof  for  which  property 

an  allowance  is  or  has  been  made ;  or 

(d)  Premiums  paid  on  any  life  insurance  policy  insurance  carried 
covering  the  life  of  any  officer  or  employee,  or  of  for  officers  or  cm* 
any  person  financially  interested  in  any  trade  or  p^^*®* 
business  carried  on  by  the  taxpayer,  when  the  tax- 
payer is  directly  or  indirectly  a  beneficiary  under 

such  policy. 

Credits  Allowed. 

Sec.  216.  That  for  the  purpose  of  the  normal  tax  Credits  allowed  for 
only  there  shall  be  allowed  the  following  credits :      n®"^""*  **'^* 

(a)  The  amount  received  as  dividends  from  a  cor-  Dividends 
poration  which  is  taxable  under  this  title  upon  its 

net  income,  and  amounts  received  as  dividends  from 
a  personal  service  corporation  out  of  earnings  or 
profits  upon  which  income  tax  has  been  imposed  by 
Act  of  Congress; 

(b)  The  amount  received  as  interest  upon  obliga-  interest  on  bonds 
tions  of  the  United  States  and  bonds  issued  by  the  of  u.  s.  and  War 
War  Finance  Corporation,  which  is  included  in  P^^^""  Corporation 
gross  income  under  section  213; 

(c)  In  the  case  of  a  single  person,  a  personal  ex-  Personal 
emption  of  $1,000,  or  in  the  case  of  the  head  of  a  exemption 
family  or  a  married  person  living  with  husband  or 


so 


Revenue    Act 


Eiemption  for 
dependent 


Conditional  ei- 
emption to  non* 
resident  aliens 


\ 


Deductions  and 
credits  allowed  only 
if  returns  are  filed 


wife,  a  personal  exemption  of  $2,000.  A  husband 
and  wife  living  together  shall  receive  but  one  per- 
sonal exemption  of  $2,000  against  their  aggregate 
net  income;  and  in  case  they  make  separate  re- 
turns, the  personal  exemption  of  $2,000  may  be 
taken  by  either  or  divided  between  them ; 

(d)  $200  for  each  person  (other  than  husband  or 
wife)  dependent  upon  and  receiving  his  chief  sup- 
port from  the  taxpayer,  if  such  dependent  person  is 
under  eighteen  years  of  age  or  is  incapable  of  self- 
support  because  mentally  or  physically  defective. 

(e)In  the  case  of  a  nonresident  alien  individual 
who  is  a  citizen  or  subject  of  a  country  which  im- 
poses an  income  tax,  the  credits  allowed  in  subdivi- 
sions (c)  and  (d)  shall  be  allowed  only  if  such 
country  allows  a  similar  credit  to  citizens  of  the 
United  States  not  residing  in  such  country. 

Nonresident  Aliens — Allowance  of  Deductions  and 

Credits. 

Sec.  217.  That  a  nonresident  alien  individual 
shall  receive  the  benefit  of  the  deductions  and  cred- 
its allowed  in  this  title  only  by  filing  or  causing  to 
be  filed  with  the  collector  a  true  and  accurate  return 
of  his  total  income  received  from  all  sources  corpor- 
ate or  otherwise  in  the  United  States,  in  the  manner 
prescribed  by  this  title,  including  therein  all  the  in- 
formation which  the  Conmiissioner  may  deem  nec- 
essary for  the  calculation  of  such  deductions  and 
credits;  Provided,  That  the  benefit  of  the  credits  al- 
lowed in  subdivisions  (c)  and  (d)  of  section  210 
may,  in  the  discretion  of  the  Commissioner,  and  ex- 
cept as  otherwise  provided  in  subdivision  (e)  of 
that  section  be  received  by  filing  a  claim  therefor 
with  the  withholding  agent.  In  case  of  failure  to 
file  a  return,  the  collector  shall  collect  the  tax  on 
such  income,  and  all  property  belonging  to  such 


IkcomsTax  si 

nonresident  alien  individual  shall  be  liable  to  dis- 
traint for  the  tax. 

Partnerships  and  Personal  Service  Corporations. 

Sec.  218.  (a)  That  individuals  carrying  on  busi-  Members  taxed  as 
ness  in  partnership  shall  be  liable  for  income  tax  individuals 
only  in  their  individual  capacity.  There  shall  be  in- 
cluded in  computing  the  net  income  of  each  partner 
^  his  distributive  share,  whether  distributed  or  not,  of  ,, 

. ,  ,     .  /»    .  1  .  i_  •       i»         .  1        .  1  1      Net  income  includes 

the  net  mcome  oi  the  partnership  tor  the  taxable  earnings  whether 
year,  or,  if  his  net  income  for  such  taxable  year  is  distributed  or  not 
computed  upon  the  basis  of  a  period  different  from 
that  upon  the  basis  of  which  the  net  income  of  the 
partnership  is  computed,  then  his  distributive  share 
of  the  net  income  of  the  partnership  for  any  ac- 
counting period  of  the  partnership  ending  within 
the  fiscal  or  calendar  year  upon  the  basis  of  which 
the  partner's  net  income  is  computed. 

The  partner  shall,  for  the  purpose  of  the  normal  Credits  allowed 
tax,  be  allowed  as  credits,  in  addition  to  the  credits  members 
allowed  to  him  under  section  216,  his  proportionate 
share  of  such  amounts  specified  in  subdivisions  (a) 
and  (b)  of  section  216  as  are  received  by  the  part- 
nership. 

(b)  If  a  fiscal  year  of  a  partnership  ends  during  a  Partnership 
calendar  year  for  which  the  rates  of  tax  differ  from  fi»cai  year 
those  for  the  preceding  calendar  year,  then  (1)  the 
rates  for  such  preceding  calendar  year  shall  apply 
to  an  amount  of  each  partner's  share  of  such  part- 
nership net  income  equal  to  the  proportion  which 
the  part  of  such  fiscal  year  falling  within  such  cal- 
endar year  bears  to  the  full  fiscal  year,  and  (2)  the 
rates  for  the  calendar  year  during  which  such  fiscal 
year  ends  shall  apply  to  the  remainder. 

(c)  In  the  case  of  an  individual  member  of  a  Deduction  of  excess 
paii:nership  which  makes  return  for  a  fiscal  year  ^^.^J^J^^^^^^^^ 
beginning  in  1917  and  ending  in  1918,  his  propor- 


S2 


Revenue   Act 


Net  income  of  part- 
nership 


Personal  lerrice 
corporations 

Stockholders  taxed 
as  members  of  part- 
nerships 


Taxable  on  both 
distributed  and  un- 
distributed earnings 


Taxable  income: 


Received  during 
administration 


tionate  share  of  any  excess  profits  tax  imposed  upon 
the  partnership  under  the  Revenue  Act  of  1917 
with  respect  to  that  part  of  such  fiscal  year  falling 
in  1917,  shall,  for  the  purpose  of  determining  the 
tax  imposed  by  this  title,  be  credited  against  that 
portion  of  the  net  income  embraced  in  his  personal 
return  for  the  taxable  year  1918  to  which  the  rates 
for  1917  apply. 

(d)  The  net  income  of  the  partnersliip  shall  be 
computed  in  the  same  manner  and  on  the  same  basis 
as  provided  in  section  212,  except  that  the  deduc- 
tion provided  in  paragraph  (11)  of  subdivision  (a) 
of  section  214  shall  not  be  allowed. 

(e)  Personal  service  corporations  shall  not  be 
subject  to  taxation  under  this  title,  but  the  individ- 
ual stockholders  thereof  shall  be  taxed  in  the  same 
manner  as  the  members  of  partnerships.  All  the 
provisions  of  this  title  relating  to  partnerships  and 
the  members  thereof  shall  so  far  as  practicable  ap- 
ply to  personal  service  corporations  and  the  stock- 
holders thereof;  Provided,  That  for  the  purpose  of 
this  subdivision  amounts  distributed  by  a  personal 
service  corporation  during  its  taxable  year  shall  be 
accounted  for  by  the  distributees;  and  any  portion 
of  the  net  income  remaining  undistributed  at  the 
close  of  its  taxable  year  shall  be  accounted  for  by 
the  stockliolders  of  such  corporation  at  the  close  of 
its  taxable  year  in  proportion  to  their  respective 
shares. 

Estates  and  Trusts. 

Sec.  219.  (a)  That  the  tax  imposed  by  sections 
210  and  211  shall  apply  to  the  income  of  estates  or 
of  any  kind  of  property  held  in  trust,  including — 

(1)  Income  received  by  estates  of  deceased  per- 
sons during  the  period  of  administration  or  settle- 
ment of  the  estate ; 


IircoMs  Tax  33 

(2)  Income  accumulated  in  trust  for  the  benefit    ccumuiaied  in  iruti 
of  unborn  or  unascertained  persons  or  persons  with 
contingent  interests; 

(3)  Income  held  for  future  distribution  under  Held  for  future 
the  terms  of  the  will  or  trust;  and  di.iribution 

(4)  Income  which  is  to  be  distributed  to  the  bene-  Distributed 
ficiaries  periodically,  whether  or  not  at  regular  in-  p«"<x*»c«Uj 
tervals,  and  the  income  collected  by  a  guardian  of 

an  infant  to  be  held  or  distributed  as  the  court  may 
direct. 

(b)  The  fiduciary  shall  be  responsible  for  mak-  Fiduciary  must  make 
ing  the  return  of  income  for  the  estate  or  trust  for  ^«*"™ 

which  he  acts.  The  net  income  of  the  estate  or  trust 
shall  be  computed  in  the  same  manner  and  on  the 
same  basis  as  provided  in  section  212,  except  that 
there  shall  also  be  allowed  as  a  deduction  (in  lieu 
of  the  deduction  authorized  by  paragraph  (11)  of  fi^*/„"^^^^^^ 
subdivision  (a)  of  section  214)  any  part  of  the  [dentificVedJT^^^^^ 
gross  income  which,  pursuant  to  the  terms  of  the  tionai  bequests 
will  or  deed  creating  the  trust,  is  during  the  taxa- 
ble year  paid  to  or  permanently  set  aside  for  the 
United  States,  any  State,  Territory,  or  any  polit- 
ical subdivision  thereof,  or  the  District  of  Colum- 
bia, or  any  corporation  organized  and  operated  ex- 
clusively for  reUgious,  charitable,  scientific,  or  ed- 
ucational purposes,  or  for  the  prevention  of  cruel- 
ty to  children  or  animals,  no  part  of  the  net  earn- 
ings of  which  inures  to  the  benefit  of  any  private 
stockholder  or  individual ;  and  in  cases  under  para- 
graph (4)  of  subdivision  (a)  of  this  section  the 
fiduciary  shall  include  in  the  return  a  statement  of 
each  beneficiary's  distributive  share  of  such  net  in- 
come, whether  or  not  distributed  before  the  close 
of  the  taxable  year  for  which  the  return  is  made. 

(c)  In  cases  under  paragraph  (1),  (2),  or  (3)  Fiduciary  must  pay 
of  subdivision  (a)  the  tax  shall  be  imposed  upon  tai,when 

the  net  income  of  the  estate  or  trust  and  shall  be 


34 


Revb N us   Act 


Credits 


Beneficiary  must  pay 
the  tax,  when 


Credits 


paid  by  the  fiduciary,  except  that  in  determining 
the  net  income  of  the  estate  of  any  deceased  per- 
son during  the  period  of  administration  or  settle- 
ment there  may  be  deducted  the  amount  of  any  in- 
come properly  paid  or  credited  to  any  legatee, 
heir  or  other  beneficiary.  In  such  cases  the  estate 
or  trust  shall,  for  the  purpose  of  the  normal  tax, 
be  allowed  the  same  credits  as  are  allowed  to  single 
persons  under  section  216. 

(d)  In  cases  under  paragraph  (4)  of  subd ten- 
sion (a)  and  in  the  case  of  any  income  of  an  es- 
state  during  the  period  of  administration  or  settle- 
ment permitted  by  subdivision  (c)  to  be  deducted 
from  the  net  income  upon  which  tax  is  to  be 
paid  by  the  fiduciary,  the  tax  shall  not  be  paid 
by  the  fiduciary  but  there  shall  be  included 
in  computing  the  net  income  of  each  beneficiary 
his  distributive  share,  whether  distributed  or  not, 
of  the  net  income  of  the  estate  or  trust  for  the  tax- 
able year,  or,  if  his  net  income  for  such  taxable 
year  is  computed  upon  the  basis  of  a  period  differ- 
ent from  that  upon  the  basis  of  which  the  net  in- 
come of  the  estate  or  trust  is  computed,  then  his 
distributive  share  of  the  net  income  of  the  estate  or 
trust  for  any  accounting  period  of  such  estate  or 
trust  ending  within  the  fiscal  or  calendar  year 
upon  the  basis  of  which  such  beneficiary's  net  in- 
come is  computed.  In  such  cases  the  beneficiary 
shall,  for  the  purpose  of  the  normal  tax,  be  al- 
lowed as  credits  in  addition  to  the  credits  al- 
lowed to  him  under  section  216,  his  proportion- 
ate share  of  such  amounts  specified  in  subdivi- 
sions (a)  and  (b)  of  section  216  as  are  received 
by  the  estate  or  trust. 


INCOME   Tax  S5 

Profits  of  Corporations  Taxable  to  Stockholders. 

Sec.    220.    That    if   any   corporation,    however  u«e  of  corporate 
created  or  organized,  is  formed  or  availed  of  for  f«™  »•  e^^de  surtax 
the  purpose  of  preventing  the  imposition  of  the 
sm'tax  upon  its  stockholders  or  members  through 
the  medium  of  permitting  its  gains  and  profits  to 
accumulate  instead  of  being  divided  or  distribu- 
ted, such  corporation  shall  not  be  subject  to  the 
tax  imposed  by  section  230,  but  the  stockholders  Stockholders  taxed 
or  members  thereof  shall  be  subiect  to  taxation  •»  I»«i»\.*»t;5»»"t^d 

,  *^  and  undistributed 

under  this  title  m  the  same  manner  as  provided  profits 
in  subdivision  (e)  of  section  218  in  the  case  of 
stockliolders  of  a  personal  service  corporation,  ex- 
cept that  the  tax  imposed  by  title  III  shall  be  de- 
ducted from  the  net  income  of  the  corporation 
before  the  computation  of  the  proportionate  share 
of  each  stockliolder  or  member.  The  fact  that  any  Evidence  of  intent  to 
corporation  is  a  mere  holding  company,  or  that  the 
gains  and  profits  are  permitted  to  accimiulate  be- 
yond the  reasonable  needs  of  the  business,  shall  be 
prima  facie  evidence  of  a  purpose  to  escape  the  sur- 
tax; but  the  fact  that  the  gains  and  profits  are  in 
.  any  case  permitted  to  accumulate  and  become  sur- 
plus shall  not  be  construed  as  evidence  of  a  purpose 
to  escape  the  tax  in  such  case  unless  the  Commis- 
sioner certifies  that  in  his  opinion  such  accumulation 
is  unreasonable  for  the  purposes  of  the  business. 
When  requested  by  the  Commissioner,  or  any  col-  information  from 
lector,  every  corporation  shall  forward  to  him  a  cor-  corporation 
rect  statement  of  such  gains  and  profits  and  the 
names  and  addresses  of  the  individuals  or  sharehold- 
ers who  would  be  entitled  to  the  same  if  divided  or 
distributed,  and  of  the  amounts  that  would  be  pay- 
able to  each. 


86 


Rsvs  V  us   Act 


Withholding  at  source 


Applies  to  income  of 
nonresident  aliens 
except  diridendi 


Interest  on  obligations 
whose  owners  are 
unknown 


"Tax-free  covenant" 
bond  interest  payable 
to  an  individual  or 
partnership 


Rate  2  per  cent 


Payment  of  Tax  at  Source. 

Sec.  221.  (a)  That  all  individuals,  corporations 
and  partnerships,  in  whatever  capacity  acting,  in- 
cluding lessees  or  mortgagors  of  real  or  personal 
property,  fiduciaries,  employers,  and  all  officers  and 
employees  of  the  United  States,  having  the  control, 
receipt,  custody,  disposal,  or  payment,  of  interest, 
rent,  salaries,  wages,  premiums,  annuities,  compen- 
sations, remunerations,  emoluments,  or  other  fixed 
or  determinable  annual  or  periodical  gains,  profits, 
and  income,  of  any  nonresident  alien  individual 
(other  than  income  received  as  dividends  from  a  cor- 
poration which  is  taxable  under  this  title  upon  its 
net  income)  shall  (except  in  the  cases  provided  for 
in  subdivision  (b)  and  except  as  otherwise  provided 
in  regulations  prescribed  by  the  Commissioner  un- 
der section  217)  deduct  and  withhold  from  such  an- 
nual or  periodical  gains,  profits,  and  income  a  tax 
equal  to  8  per  centum  thereof;  Provided,  That  tlic 
Commissioner  may  authorize  such  tax  to  be  de- 
ducted and  withheld  from  the  interest  upon  any  se- 
curities the  owners  of  which  are  not  known  to  the 
withholding  agent. 

(b)  In  any  case  where  bonds,  mortgages,  or  deeds 
of  trust,  or  other  similar  obligations  of  a  corporation 
contain  a  contract  or  provision  by  which  the  obligor 
agrees  to  pay  any  portion  of  the  tax  imposed  by  this 
title  upon  the  obligee,  or  to  reimburse  the  obligee 
for  any  portion  of  the  tax,  or  to  pay  the  interest 
without  deduction  for  any  tax  which  the  obligor  may 
be  required  or  permitted  to  pay  thereon  or  to  retain 
therefrom  under  any  law  of  the  United  States,  the 
obligor  shall  deduct  and  withhold  a  tax  equal  to  2 
per  centum  of  the  interest  upon  such  bonds,  mort- 
gages, deeds  of  trust,  or  other  obligations,  whether 
such  interest  is  payable  annually  or  at  shorter  or 
longer  periods  and  whether  payable  to  a  nonresident 


IitcomkTax  S7 

alien  individual  or  to  an  individual  citizen  or  resident 
of  the  United  States  or  to  a  partnership ;  Provided, 
That  the  Commissioner  may  authorize  such  tax  to  Owners  unknown 
be  deducted  and  withheld  in  the  case  of  interest  up-  i 

on  any  such  bonds,  mortgages,  deeds  of  trust  or 
other  obhgations,  the  owners  of  which  are  not 
known  to  the  withholding  agent.  Such  deduction 
and  withholding  shall  not  be  required  in  the  case 
of  a  citizen  or  resident  entitled  to  receive  such  inter-  ^^*™  ^^^  exemption 
est,  if  he  files  with  the  withholding  agent  on  or  be-  "^"^  ^**  **  *"^ 
fore  February  1,  a  signed  notice  in  writing  claiming 
the  benefit  of  the  credits  provided  in  subdivisions 
(c)  and  (d)  of  section  216 ;  nor  in  the  case  of  a  non- 
resident alien  individual  if  so  provided  for  in  regu- 
lations prescribed  by  the  Commissioner  under  sec- 
tion 217. 

(c)  Every  individual,  corporation,  or  partnership  Returns  by  with- 
required  to  deduct  and  withhold  any  tax  under  this  holding  agents 
section   shall  make  return  thereof  on  or  before 

March  first  of  each  year  and  shall  on  or  before  June 
fifteenth  pay  the  tax  to  the  official  of  the  United 
States  Government  authorized  to  receive  it.  Every 
such  individual,  corporation,  or  partnership  is  here- 
by made  liable  for  such  tax  and  is  hereby  indemni- 
fied against  the  claims  and  demands  of  any  individ- 
ual, corporation,  or  partnership  for  the  amount  of 
any  payments  made  in  accordance  with  the  provi- 
sions of  this  section. 

(d)  Income  upon  which  any  tax  is  required  to  be  Credit  for  tax  with- 
withheld  at  the  source  under  this  section  shall  be  in-  held  at  source 
eluded  in  the  return  of  the  recipient  of  such  income, 

but  any  amount  of  tax  so  withheld  shall  be  credited 
against  the  amount  of  income  tax  as  computed  in 
such  return. 

(e)  If  any  tax  required  under  this  section  to  be  J^^^^^^^^^^^^ 
deducted  and  withheld  is  paid  by  the  recipient  of  withholding  agent, 
the  income,  it  shall  not  be  re-collected  from  the  with-  where  already  paid 


88 


Rb  VE  KUB     A  CT 


Credit  for  foreign 
taxes  allowed  to: 

Gtizens 


Residents 


Resident  aliens 


Partners  and  bene- 
ficiaries of  estates 
or  trusts 


Redetermination  of 
tax. 


holding  agent;  nor  in  cases  in  which  the  tax  is  so 
paid  shall  any  penalty  be  imposed  upon  or  collected 
from  the  recipient  of  the  income  or  the  withholding 
agent  for  failure  to  return  or  pay  the  same,  unless 
such  failure  was  fraudulent  and  for  the  purpose  of 
evading  payment. 

Credit  for  Taxes. 

Sec.  222.  (a)  That  the  tax  computed  under  Part 
II  of  this  title  shall  be  credited  with : 

(1)  In  the  case  of  a  citizen  of  the  United  States, 
the  amount  of  any  income,  war-profits  and  excess- 
profits  taxes  paid  during  the  taxable  year  to  any 
foreign  country,  upon  income  derived  from  sources 
therein,  or  to  any  possession  of  the  United  States ; 
and 

(2)  In  the  case  of  a  resident  of  the  United  States, 
the  amount  of  any  such  taxes  paid  during  the  taxa- 
ble year  to  any  possession  of  the  United  States;  and 

(3)  In  the  case  of  an  alien  resident  of  the  United 
States  who  is  a  citizen  or  subject  of  a  foreign  coun- 
try, the  amount  of  any  such  taxes  paid  during  the 
taxable  year  to  such  country,  upon  income  derived 
from  sources  therein,  if  such  country,  in  imposing 
such  taxes,  allows  a  similar  credit  to  citizens  of  the 
United  States  residing  in  such  country;  and 

(4)  In  the  case  of  any  such  individual  who  is  a 
member  of  a  partnership  or  a  beneficiary  of  an  es- 
tate or  trust,  his  proportionate  share  of  such  taxes 
of  the  partnership  or  the  estate  or  trust  paid  during 
the  taxable  year  to  a  foreign  country  or  to  any  pos- 
session of  the  United  States,  as  the  case  may  be. 

(b)  If  accrued  taxes  when  paid  differ  from  the 
amounts  claimed  as  credits  by  the  taxpayer,  or  if 
any  tax  paid  is  refunded  in  whole  or  in  part,  the 
taxpayer  shall  notify  the  Commissioner  who  shall  re- 
determine the  amount  of  the  tax  due  under  Part  II 


Is-coMs   Tax  89 

of  this  title  for  the  year  or  years  affected,  and  the 
amount  of  tax  due  upon  such  redetermination,  if 
any,  shall  be  paid  by  the  taxpayer  upon  notice  and 
demand  by  the  collector,  or  the  amount  of  tax  over- 
paid, if  any,  shall  be  credited  or  refunded  to  the  tax- 
payer in  accordance  with  the  provisions  of  section 
252.  In  the  case  of  such  a  tax  accrued  but  not  paid, 
the  Commissioner  as  a  condition  precedent  to  the 
allowance  of  this  credit  may  require  the  taxpayer  to 
give  a  bond  with  sureties  satisfactory  to  and  to  be  Bond  for  payment 
approved  by  the  Commissioner  in  such  penal  sum 
as  the  Commissioner  may  require,  conditioned  for 
the  payment  by  the  taxpayer  of  any  amount  of  tax 
found  due  upon  any  such  redetermination;  and  the 
bond  herein  prescribed  shall  contain  such  further 
conditions  as  the  Commissioner  may  require. 

(c)  These  credits  shall  be  allowed  only  if  the  tax-  Evidence  required  to 
payer  furnishes  evidence  satisfactory  to  the  Com-  •*»*"»«'«** 
missioner  showing  the  amount  of  income  derived 
from  sources  within  such  foreign  country  or  such 
possession  of  the  United  States,  and  all  other  in- 
formation necessary  for  the  computation  of  such 

credits. 

Individual  Returns. 

Sec.  223.  That  every  individual  having  a  net  in- 
come for  the  taxable  year  of  $1,000  or  over  if  single  single  person 
or  if  married  and  not  living  with  husband  or  wife, 
or  of  $2,000  or  over  if  married  and  living  with  hus- 
band or  wife,  shall  make  under  oath  a  return  stat-  Married  person 
ing  specifically  the  items  of  his  gross  income  and 
the  deductions  and  credits  allowed  by  this  title.    If 
a  husband  and  wife  living  together  have  an  aggre- 
gate net  income  of  $2,000  or  over,  each  shall  make  Joint  return 
such  a  return  unless  the  income  of  each  is  included 
in  a  single  joint  return. 

If  the  taxpayer  is  unable  to  make  his  own  return, 
the  return  shall  be  made  by  a  duly  authorized  agent  Return  by  agent 


40 


Partnerslupt  mail 
make  rctarnt 


When  fiduciary 
return  ia  required 


Joint  fiduciaries 


RsvKXUB  Act 

or  by  the  guardian  or  other  person  charged  with  the 
care  of  the  person  or  property  of  each  taxpayer. 

Partnership  Returns. 

Sec.  224.  That  every  partnersliip  shall  make  a 
return  for  each  taxable  year,  stating  specifically  the 
items  of  its  gross  income  and  the  deductions  allowed 
by  this  title  and  shall  include  in  the  return  the  names 
and  addresses  of  the  individuals  who  would  be  enti- 
tled to  share  in  the  net  income  if  distributed  and  the 
amount  of  the  distributive  share  of  each  individual. 
The  return  shall  be  sworn  to  by  any  one  of  the  part- 
ners. 

Fiduciary  Returns. 

Sec.  225.  That  every  fiduciary  (except  receivers 
appointed  by  authority  of  law  in  possession  of  part 
only  of  the  property  of  an  individual)  shall  make 
under  oath  a  return  for  the  individual,  estate  or 
trust  for  which  he  acts  (1 )  if  the  net  income  of  such 
individual  is  $1,000  or  over  if  single  or  if  married 
and  not  living  with  husband  or  wife,  or  $2,000  or 
over  if  married  and  living  with  husband  or  wife,  or 
(2)  if  the  net  income  of  such  estate  or  trust  is  $1,000 
or  over  or  if  any  beneficiary  of  such  estate  or  trust 
is  a  nonresident  alien,  stating  specifically  the  items 
of  the  gross  income  and  the  deductions  and  credits 
allowed  by  this  title.  Under  such  regulations  as  the 
Commissioner  with  the  approval  of  the  Secretary 
may  prescribe,  a  return  made  by  one  of  two  or  more 
joint  fiduciaries  and  filed  in  the  office  of  the  collector 
of  the  district  where  sucli  fiduciary  resides  shall  be 
a  sufficient  compliance  with  the  above  requirement. 
The  fiduciary  shall  make  oath  that  he  has  sufficient 
knowledge  of  the  affairs  of  such  individual,  estate 
or  trust  to  enable  him  to  make  the  return,  and  that 
the  same  is,  to  the  best  of  his  knowledge  and  belief, 
true  and  correct. 


IvcombTax  41 

Fiduciaries  required  to  make  returns  under  this 
Act  shall  be  subject  to  all  the  provisions  of  this  Act 
which  apply  to  individuals. 

Returns  when  Accounting  Period  Changed. 

Sec.  226.  That  if  a  taxpayer,  with  the  approval  Change  from  fiscal 

o  ,1       r^  •      •  V  J.1       1.       •        i»  i     *<>  calendar  year 

of  the  Commissioner,  changes  the  basis  of  comput- 
ing net  income  from  fiscal  year  to  calendar  year  a 
I  separate  return  shall  be  made  for  the  period  be- 
tween the  close  of  the  last  fiscal  year  for  which  re- 
turn was  made  and  the  following  December  31.  If 
the  change  is  from  calendar  year  to  fiscal  year,  a  Change  from  calendar 
separate  return  shall  be  made  for  the  period*  be-  *®fi«caiyear 
tween  the  close  of  the  last  calendar  year  for  which 
return  was  made  and  the  date  designated  as  the 
close  of  the  fiscal  year.  If  the  change  is  from  one 
fiscal  year  to  another  fiscal  year  a  separate  return 
shall  be  made  for  the  period  between  the  close  of 
the  former  fiscal  year  and  the  date  designated  as 
the  close  of  the  new  fiscal  year.  If  a  taxpayer  mak- 

»ing  his  first  return  for  income  tax  keeps  his  accounts 
on  the  basis  of  a  fiscal  year  he  shall  make  a  separate 
return  for  the  period  between  the  beginning  of  the 
calendar  year  in  which  such  fiscal  year  ends  and 
►  the  end  of  such  fiscal  year. 

In  all  of  the  above  cases  the  net  income  shall  be  Computation  of  net 
computed  on  the  basis  of  such  period  for  which  sep-  '"^•"® 
arate  return  is  made,  and  the  tax  shall  be  paid  there- 
on at  the  rate  for  the  calendar  year  in  which  such 
period  is  included ;  and  the  credits  provided  in  sub- 
divisions (c)  and  (d)  of  section  216  shall  be  re- 
duced respectively  to  amounts  which  bear  the  same 
ratio  to  the  full  credits  provided  in  such  subdivi- 
sions as  the  number  of  months  in  such  period  bears 
to  twelve  months. 


Rkvkvus   Act 


When  return!  must 
be  61ed 


Extension  of  time 
for  filing 


Where  returns  must 
be  filed 


Time  and  Place  for  Filing  Returns. 

Sec.  227.  (a)  That  returns  shall  be  made  on  or 
before  the  fifteenth  day  of  the  third  month  follow- 
ing the  close  of  the  fiscal  year,  or,  if  the  return  is 
made  on  the  basis  of  the  calendar  year,  then  the 
return  shall  be  made  on  or  before  the  fifteenth  day 
of  March,  The  Commissioner  may  grant  a  reason- 
able extension  of  time  for  filing  returns  whenever  in 
his  judgment  good  cause  exists  and  shall  keep  a 
record  of  every  such  extension  and  the  reason 
therefor.  Except  in  the  case  of  taxpayers  who  are 
abroad,  no  such  extension  sliall  be  for  more  than 
six  months. 

(b)  Returns  shall  be  made  to  the  collector  for  the 
district  in  which  is  located  the  legal  residence  or 
principal  place  of  business  of  the  person  making  the 
return,  or,  if  he  has  no  legal  residence  or  principal 
place  of  business  in  the  United  States,  then  to  the 
collector  at  Baltimore,  Maryland. 


Correction 


Understatement  in  Returns. 

Sec.  228.  That  if  the  collector  or  deputy  collector 
has  reason  to  believe  that  the  amount  of  any  income 
returned  is  understated,  he  shall  give  due  notice  to 
the  taxpayer  making  the  return  to  show  cause  why 
the  amount  of  the  return  should  not  be  increased, 
and  upon  proof  of  the  amount  understated,  may 
increase  the  same  accordingly.  Such  taxpayer  may 
furnish  sworn  testimony  to  prove  any  relevant  facts 
and  if  dissatisfied  with  the  decision  of  the  collector 
may  appeal  to  the  Commissioner  for  his  decision, 
under  such  rules  of  procedure  as  may  be  prescribed 
by  the  Conmiissioner  with  the  approval  of  the  Sec- 
retary. 


Income   Tax  45 

PART  III.— CORPORATIONS. 

Tax  on  Corporations. 

Sec.  230.  (a)  That,  in  lieu  of  the  taxes  im-  Corporation  income 
posed  by  section  10  of  the  Revenue  Act  of  1916,  as  »« 
amended  by  the  Revenue  Act  of  1917,  and  by  sec- 
tion 4  of  the  Revenue  Act  of  1917,  there  shall  be 
levied,  collected,  and  paid  for  each  taxable  year 
upon  the  net  income  of  every  corporation  a  tax  at 
the  following  rates : 

(1)  For  the  calendar  year  1918,  12  per  centum  I9i8raie 
of  the  amount  of  the  net  income  in  excess  of  the 
credits  provided  in  section  236 ;  and 

(2)  For  each  calendar  year  thereafter,  10  per  Rate  for  succeeding 
centum  of  such  excess  amount.  y®"* 

(b)  For  the  purposes  of  the  Act  approved  March  Carriers  under 
21, 1918,*entitled  "An  Act  to  provide  for  the  opera-  ''«^«'«*  «•"•'«' 
tion  of  transportation  systems  while  under  Federal 
control,  for  the  just  compensation  of  their  owners 
and  for  other  purposes,"  five-sixths  of  the  tax  im- 
posed by  paragraph  (1)  of  subdivision  (a)  and 
four-fifths  of  the  tax  imposed  by  paragraph  (2) 
of  subdivision  (a)  shall  be  treated  as  levied  by  an 
Act  in  amendment  of  Title  I  of  the  Revenue  Act 
of  1917. 

•Section  1  of  the  Act  approved  March  21,  1918,  contains  the  fol- 
lowing provision  respecting  the  division  of  taxes  between  the  Gov- 
ernment and  the  railways: 

Every  such  agreement  [between  Government  and  carrier]  shall 
provide  that  any  Federal  taxes  under  the  Act  of  October  third,  nine- 
teen hundred  and  seventeen,  or  Acts  in  addition  thereto  or  in  amend- 
ment thereof,  conunonly  called  war  taxes,  assessed  for  the  period  of 
Federal  control  beginning  January  first,  nineteen  hundred  and 
eighteen,  or  any  part  of  such  period,  shall  be  paid  by  the  carrier  out 
of  his  own  funds,  or  shall  be  charged  against  or  deducted  from  the 
just  compensation;  that  other  taxes  assessed  under  Federal  or  any 
other  governmental  authority  for  the  period  of  Federal  control  or  any 
part  thereof  ♦  ♦  *  shall  be  paid  out  of  revenues  derived  from 
railway  operations  while  under  Federal  control    •    "    " 


•    • 


44 


RsTBKUK   Act 


Exempt  corporation!: 
Labor  organizationt 
Mutual  tanngs  banks 
Fraternal  societies 


Building  and  loan 
associations 


Cemetery  companiet 


Educational  or 
charitable  corpora- 
tions 


Chambers  off 
commerce 


Cvic  leagues 


Recreation  clubs 


Conditional  and  Other  Exemptions. 

Sec.  231.  That  the  following  organizations  shall 
be  exempt  from  taxation  under  this  title — 

(1)  Labor,  agricultural,  or  horticultural  organ- 
izations ; 

(2)  Mutual  savings  banks  not  having  a  capital 
stock  represented  by  shares ; 

(3)  Fraternal  beneficiary  societies,  orders,  or  as- 
sociations, (a)  operating  under  the  lodge  system 
or  for  the  exclusive  benefit  of  the  members  of  a 
fraternity  itself  operating  under  the  lodge  system, 
and  (b)  providing  for  the  payment  of  life,  sick,  ac- 
cident or  other  benefits  to  the  members  of  such  so- 
ciety, order,  or  association  or  their  dependents; 

(4)  Domestic  building  and  loan  associations  and 
cooperative  banks  without  capital  stock  organized 
and  operated  for  mutual  purposes  and  without 
profit; 

(5)  Cemetery  companies  owned  and  operated  ex- 
clusively for  the  benefit  of  their  members; 

(6)  Corporations  organized  and  operated  exclu- 
sively for  religious,  charitable,  scientific,  or  educa- 
tional purposes,  or  for  the  prevention  of  cruelty  to 
children  or  animals,  no  part  of  the  net  earnings  of 
which  inures  to  the  benefit  of  any  private  stock- 
holder or  individual ; 

(7)  Business  leagues,  chambers  of  commerce,  or 
boards  of  trade,  not  organized  for  profit  and  no  part 
of  the  net  earnings  of  which  inures  to  the  benefit 
of  any  private  stockholder  or  individual ; 

(8)  Civic  leagues  or  organizations  not  organized 
for  profit  but  operated  exclusively  for  the  promo- 
tion of  social  welfare; 

(9)  Clubs  organized  and  operated  exclusively 
for  pleasure,  recreation  and  other  nonprofitable 
purposes,  no  part  of  the  net  earnings  of  which  in- 


Ikcome  Tax  46 

ures  to  the  benefit  of  any  private  stockholder  or 
member ; 

(10)  Farmers'  or  other  mutual  hail,  cyclone  or  Lo"*«"|"a* 
fire  insurance  companies,  mutual  ditch  or  irrigation  ®'«^™"'*®"' 
companies,  mutual  or  cooperative  telephone  com- 
panies or  like  organizations  of  a  purely  local  char- 
acter, the  income  of  which  consists  solely  of  assess- 
ments, dues,  and  fees  collected  from  members  for 

the  sole  purpose  of  meeting  expenses ; 

( 11 )  Farmers',  fruit  growers',  or  like  associations.  Cooperative  selling 
organized  and  operated  as  sales  agents  for  the  pur-  *s®""®* 
pose  of  marketing  the  products  of  members  and 

turning  back  to  them  the  proceeds  of  sales,  less  the 
necessary  selling  expenses,  on  the  basis  of  the  quan- 
tity of  produce  furnished  by  them; 

(12)  Corporations  organized  for  the  exclusive  Holding 
purpose  of  holding  title  to  property,  collecting  in-  c»T>»^at»»n«  ^^ 
come  therefrom,  and  turning  over  the  entire  amount  "*T   . 

,,  «    ,  .         °  ...  1  •   1     •.      organizations 

thereoi,  less  expenses,  to  an  organization  which  it- 
self is  exempt  from  the  tax  imposed  by  this  title ; 

(13)  Federal  land  banks  and  national  farm-loan  Federaiiand banks 
associations  as  provided  in  section  26  of  the  Act  «"<>n«tio»«>/™- 

n-ri  '  1     ^   cc  A         A  »®*"  associations 

approved  July  17,  1916,  entitled  An  Act  to  pro- 
vide capital  for  agricultural  development,  to  create 
standard  forms  of  investment  based  upon  farm 
mortgage,  to  equalize  rates  of  interest  upon  farm 
loans,  to  furnish  a  market  for  United  States  bonds, 
to  create  Government  depositaries  and  financial 
agents  for  the  United  States,  and  for  other  pur- 
poses ;" 

/-.\     -r»  1  •  ••  Personal  service 

(14)  Personal  service  corporations.  corporations 

Net  Income  Defined. 

Sec.  232.  That  in  the  case  of  a  corporation  sub- 
ject to  the  tax  imposed  by  section  230  the  term  "net 
income"  means  the  gross  income  as  defined  in  sec-  g^j,  ^f 
tion  233  less  the  deductions  allowed  by  section  234,  computation 


4« 


Re  vs  K  UE   Act 


See  paf  e  20 

Life  insurance 
companies 


Mutual  marine 
insurance  companies 


Foreign  corporations, 
gross  income  of 


Business  expenses 


and  the  net  income  shall  be  computed  on  the  same 
basis  as  is  provided  in  subdivision  (b)  of  section 
212  or  in  section  226. 

Gross  Income  DefinecL 

Sec.  233.  (m)  That  in  the  case  of  a  corporation 
subject  to  the  tax  imposed  by  section  230  the  term 
"gross  income"  means  the  gi'oss  income  as  defined 
in  section  213,  except  that: 

(1)  In  the  case  of  life  insurance  companies  there 
shall  not  be  included  in  gross  income  such  portion 
of  any  actual  premium  received  from  any  individ- 
ual policyholder  as  is  paid  back  or  credited  to  or 
treated  as  an  abatement  of  premiimi  of  such  policy- 
holder vi^ithin  the  taxable  year. 

(2)  Mutual  marine  insurance  companies  shall 
include  in  gross  income  the  gross  premiums  col- 
lected and  received  by  them  less  amounts  paid  for 
reinsurance. 

(b)  In  the  case  of  a  foreign  corporation  gross 
income  includes  only  the  gross  income  from  sources 
within  the  United  States,  including  interest  on 
bonds,  notes,  or  other  interest-bearing  obligations 
of  residents,  corporate  or  otherwise,  dividends  from 
resident  corporations,  and  including  all  amounts  re- 
ceived (although  paid  under  a  contract  for  the 
sale  of  goods  or  otherwise)  representing  profits  on 
the  manufacture  and  disposition  of  goods  within 
the  United  States. 

Deductions  Allowed. 

Sec.  234.  (a)  That  in  computing  the  net  income 
of  a  corporation  subject  to  the  tax  imposed  by  sec- 
tion 230  there  shall  be  allowed  as  deductions: 

(1)  All  the  ordinary  and  necessary  expenses 
paid  or  incurred  during  the  taxable  year  in  carry- 
ing on  any  trade  or  business,  including  a  reasonable 


IxcomeTax  47 

allowance  for  salaries  or  other  compensation  for 
personal  services  actually  rendered,  and  including 
rentals  or  other  payments  required  to  be  made,  as  a 
condition  to  the  continued  use  or  possession  of 
property  to  which  the  corporation  has  not  taken  or 
is  not  taking  title,  or  in  which  it  has  no  equity ; 

(2)  All  interest  paid  or  accrued  within  the  tax-  interest 
able  year  on  its  indebtedness,  except  on  indebted- 
ness incurred  or  continued  to  purchase  or  carry  ob- 
ligations or  securities  (other  than  obligations  of  the 
United  States  issued  after  September  24, 1917)  the 
interest  upon  which  is  wholly  exempt  from  taxation 
under  this  title  as  income  to  the  taxpayer,  or,  in  the 
case  of  a  foreign  corporation,  the  proportion  of 
such  interest  which  the  amount  of  its  gross  income 
from  sources  within  the  United  States  bears  to  the 
amount  of  its  gross  income  from  all  sources  within 

and  without  the  United  States ; 

(3)  Taxes  paid  or  accrued  within  the  taxable  Taxes  paid  or  accrued 
year  imposed  (a)  by  the  authority  of  the  United  within  taxable  year 
States,    except    income,    war-profits    and    excess- 
profits  taxes;  or  (b)  by  the  authority  of  any  of  its 
possessions,   except  the   amount  of  income,  war- 
profits  and  excess-profits  taxes  allowed  as  a  credit 

under  section  238;  or  (c)  by  the  authority  of  any 
State  or  Territory,  or  any  county,  school  district, 
municipality,  or  other  taxing  subdivision  of  any 
State  or  Territory,  not  including  those  assessed 
against  local  benefits  of  a  kind  tending  to  increase 
the  value  of  the  property  assessed;  or  (d)  in  the 
case  of  a  domestic  corporation,  by  the  authority  of 
any  foreign  country,  except  the  amount  of  income, 
war-profits  and  excess-profits  taxes  allowed  as  a 
credit  under  section  238 ;  or  (e)  in  the  case  of  a  for- 
eign corporation,  by  the  authority  of  any  foreign 
country  (except  income,  war-profits  and  excess- 
profits  taxes,  and  taxes  assessed  against  local  bene- 


48 


RsvB K us   Act 


Debtor  corporation* 
not  permitted  to 
deduct  tax  assumed 
under  "tax-free 
coTonant"  clauses 


Losses 

Debts 

Dividends  from 
taxable  corporations 


Depreciation  and 
obsolescence 


Amortization  of  plant 
and  equipment  used 
for  war  work 


Review  of  amortiza- 
tion deduction  by 
(Commissioner 


fits  of  a  kind  tending  to  increase  the  value  of  the 
property  assessed),  upon  the  property  or  business; 
Provided,  That  in  the  case  of  obligors  specified  in 
subdivision  (b)  of  section  221  no  deduction  for  the 
payment  of  the  tax  imposed  by  this  title  or  any 
other  tax  paid  pursuant  to  the  contract  or  provision 
referred  to  in  that  subdivision,  shall  be  allowed ; 

(4)  Losses  sustained  during  the  taxable  year 
and  not  compensated  for  by  insurance  or  otherwise; 

(5)  Debts  ascertained  to  be  worthless  and 
charged  off  within  the  taxable  year; 

(6)  Amounts  received  as  dividends  from  a  cor- 
poration which  is  taxable  under  this  title  upon  its 
net  income,  and  amounts  received  as  dividends  from 
a  personal  service  corporation  out  of  earnings  or 
profits  upon  which  income  tax  has  been  imposed  by 
Act  of  Congress; 

•  (7)  A  reasonable  allowance  for  the  exhaustion, 
wear  and  tear  of  property  used  in  the  trade  or  busi- 
ness, including  a  reasonable  allowance  for  obsoles- 
cence ; 

(8)  In  the  case  of  buildings,  machinery,  equip- 
ment, or  other  faciUties,  constructed,  erected,  in- 
stalled, or  acquired,  on  or  after  April  6,  1917,  for 
the  production  of  articles  contributing  to  the  prose- 
cution of  the  present  war,  and  in  the  case  of  vessels 
constructed  or  acquired  on  or  after  such  date  for 
the  transportation  of  articles  or  men  contributing 
to  the  prosecution  of  the  present  war,  there  shall  be 
allowed  a  reasonable  deduction  for  the  amortization 
of  such  part  of  the  cost  of  such  facilities  or  vessels  as 
has  been  borne  by  the  taxpayer,  but  not  again  in- 
cluding any  amount  otherwise  allowed  under  this 
title  or  previous  acts  of  Congress  as  a  deduction  in 
computing  net  income.  At  any  time  within  three 
years  after  the  termination  of  the  present  war,  the 
Conunissioner  may,  and  at  the  request  of  the  tax- 


Isr  COMK   Tax  49 

payer  shall,  reexamine  the  return,  and  if  he  then 
finds  as  a  result  of  an  appraisal  or  from  other  evi- 
dence that  the  deduction  originally  allowed  was  in- 
correct, the  taxes  imposed  by  this  title  and  by  Title 
III  for  the  year  or  years  affected  shall  be  redeter- 
mined; and  the  amount  of  tax  due  upon  such  re- 
determination, if  any,  shall  be  paid  upon  notice  and 
demand  by  the  collector,  or  the  amount  of  tax  over- 
paid, if  any,  shall  be  credited  or  refunded  to  the 
taxpayer  in  accordance  with  the  provisions  of  sec- 
tion 252 ; 

(9)  In  the  case  of  mines,  oil  and  ffas  wells,  other  ^  ,  .     , 

,11  ..  1  ,'      ^  iin  Depletion  of  natural 

natural  deposits,  and  tmiber,  a  reasonable  allowance  resources 
for  depletion  and  for  depreciation  of  improvements, 
according  to  the  peculiar  conditions  in  each  case, 
based  upon  cost  including  cost  of  development  not 
otherwise  deducted;  Provided,  That  in  the  case  of 
such  properties  acquired  prior  to  March  1, 1913,  the 
fair  market  value  of  the  property  (or  the  taxpay- 
er's interest  therein)  on  that  date  shall  be  taken  in 
lieu  of  cost  up  to  that  date ;  Provided  further.  That 
in  the  case  of  mines,  oil  and  gas  wells,  discovered  by 
the  taxpayer,  on  or  after  March  1,  1913,  and  not 
acquired  as  the  result  of  purchase  of  a  proven  tract 
or  lease,  where  the  fair  market  value  of  the  prop- 
erty is  materially  disproportionate  to  the  cost,  the 
depletion  allowance  shall  be  based  upon  the  fair 
market  value  of  the  property  at  the  date  of  the  dis- 
covery, or  within  thirty  days  thereafter ;  such  reas- 
onable allowance  in  all  the  above  cases  to  be  made 
under  rules  and  regulations  to  be  prescribed  by  the 
Commissioner  with  the  approval  of  the  Secretary. 
In  the  case  of  leases  the  deductions  allowed  by  this 
paragraph  shall  be  equitably  apportioned  between 
the  lessor  and  lessee; 

(10)  In  the  case  of  insurance  companies,  in  ad-  ,„,„^,e  companies 
dition  to  the  above:  (a)  the  net  addition  required 


50 


Ubvemui   Act 


Weekly  prenuum 
payment  insurance 
companiea 


Mutual  marine 
insurance  companies 


Other  mutual 
insurance  companies 


Qaim  in  abatement 
for: 


by  law  to  be  made  within  the  taxable  year  to  re- 
serve funds  (including  in  the  case  of  assessment  in- 
surance companies  the  actual  deposit  of  sums  with 
State  or  Territorial  officers  pursuant  to  law  as  ad- 
ditions to  guarantee  or  reserve  funds) ;  and  (b)  the 
sums  other  ihan  dividends  paid  within  the  taxable 
year  on  policy  and  annuity  contracts ; 

(11)  In  the  case  of  corporations  issuing  policies 
covering  life,  health,  and  accident  insurance  com- 
bined in  one  policy  issued  on  the  weekly  premium 
payment  plan  continuing  for  life  and  not  subject 
to  cancellation,  in  addition  to  the  above,  such  por- 
tion of  the  net  addition  (not  required  by  law)  made 
within  the  taxable  year  to  reserve  funds  as  the  Com- 
missioner finds  to  be  required  for  the  protection  of 
the  holders  of  such  policies  only; 

( 12 )  In  the  case  of  mutual  marine  insurance  com- 
panies, there  shall  be  allowed,  in  addition  to  the  de- 
ductions allowed  in  paragraphs  (1)  to  (10),  in- 
clusive, amounts  repaid  to  policyholders  on  account 
of  premiums  previously  paid  by  them,  and  interest 
paid  upon  such  amounts  between  the  ascertainment 
and  the  payment  thereof; 

(13)  In  the  case  of  mutual  insurance  companies 
(other  than  mutual  life  or  mutual  marine  insurance 
companies)  requiring  their  members  to  make  pre- 
mium deposits  to  provide  for  losses  and  expenses, 
there  shall  be  allowed,  in  addition  to  the  deductions 
allowed  in  paragraphs  (1)  to  (10),  inclusive,  (un- 
less otherwise  allowed  under  such  paragraphs)  the 
amount  of  premiimi  deposits  returned  to  their 
policyholders  and  the  amount  of  premiimi  deposits 
retained  for  the  payment  of  losses,  expenses,  and 
reinsurance  reserves; 

(14)  (a)  At  the  time  of  filing  return  for  the  tax- 
able year  1918  a  taxpayer  may  file  a  claim  in  abate- 
ment based  on  the  fact  that  he  has  sustained  a  sub- 


IncomeTax  61 

stall tial  loss   (whether  or  not  actually  reahzed  by  Loss  from  shrinkage 
sale  or  other  disposition)  resulting  from  any  ma-  of  inventory  values 
terial  reduction  (not  due  to  temporary  fluctuation) 
of  the  value  of  the  inventory  for  such  taxable  year, 
or  from  the  actual  payment  after  the  close  of  such 
taxable  year  of  rebates  in  pursuance  of  contracts  en-  Payment  of  rebates 
tered  into  during  such  year  upon  sales  made  during 
such  year.    In  such  case  payment  of  the  amount  of 
^the  tax  covered  by  such  claim  shall  not  be  required 
until  the  claim  is  decided,  but  the  taxpayer  shall  ac- 
company his  claim  with  a  bond  in  double  the  amount  Bond  for  payment 
of  the  tax  covered  by  the  claim,  with  sureties  satis-  ®^  *^* 
factory  to  the  Commissioner,  conditioned  for  the 
payment  of  any  part  of  such  tax  found  to  be  due, 
with  interest.     If  any  part  of  such  claim  is  disal- 
lowed then  the  remainder  of  the  tax  due  shall  on 
notice  and  demand  by  the  collector  be  paid  by  the 
taxpayer  with  interest  at  the  rate  of  1  per  centum 
per  month  from  the  time  the  tax  would  have  been 
due  had  no  such  claim  been  filed.    If  it  is  shown  to  Deduction  of  loss 
the  satisfaction  of  the  Commissioner  that  such  sub- 
stantial loss  has  been  sustained,  then  in  computing 
the  taxes  imposed  by  this  title  and  by  Title  III  the 
amount  of  such  loss  shall  be  deducted  from  the  net 
income,     (b)    If  no  such  claim  is  filed,  but  it  is  ^j'^^'J""^^^^^^^^ 
shown  to  the  satisfaction  of  the  Commissioner  that  claim  has  been  filed 
during  the  taxable  year  1919  the  taxpayer  has  sus- 
tained a  substantial  loss  of  the  character  above  de- 
scribed then  the  amount  of  such  loss  shall  be  de- 
ducted from  the  net  income  for  the  taxable  year 
1918  and  the  taxes  imposed  by  this  title  and  by  Title 
III  for  such  year  shall  be  redetermined  accordingly. 
Any  amount  found  to  be  due  to  the  taxpayer  upon 
the  basis  of  such  redetermination  shall  be  credited 
or  refunded  to  the  taxpayer  in  accordance  with  the 
provisions  of  section  252. 


62 


RevEKDfe   Act 


Deductions  allowed  (b)  111  tlic  cEsc  of  a  foreign  corporatioii  the  dc- 

forcif n corporauolu     (h,ctions  allowcd  in  subdivision   (a),  except  those 

allowed  in  paragraph  (2)  and  in  clauses  (a),  (b), 
and  (c)  of  paragraph  (3),  shall  be  allowed  only  if 
and  to  the  extent  that  they  are  connected  with  in- 
come arising  from  a  source  within  the  United 
States;  and  the  proper  apportionment  and  alloca- 
tion of  the  deductions  with  respect  to  sources  of  in- 
come within  and  without  the  United  States  shall  be 
determined  under  rules  and  regulations  prescribed 
by  the  Commissioner  with  the  approval  of  the 
Secretary. 

Items  Not  Deductible. 

Non-dcduciibie  items,       gEC.  235.    That  in  computing  net  income  no  dc- 
***  ^**^  duction  shall  in  any  case  be  allowed  in  respect  of  any 

of  the  items  specified  in  section  215. 


Dcdiu 


Interest  on  obliga- 
tions of  U.  S.  and  the 
War  Finance 
Corporation 

War-profits  and  excess- 
profits  tax  assessed 
for  same  taxable  year 


Credits  Allowed. 

Sec.  286.  That  for  the  purpose  only  of  the  tax 
imposed  by  section  230  there  shall  be  allowed  the 
following  credits: 

(a)  The  amount  received  as  interest  upon  obliga- 
tions of  the  United  States  and  bonds  issued  by  the 
War  Finance  Corporation,  which  is  included  in 
gross  income  under  section  233; 

(b)  The  amount  of  any  taxes  imposed  by  Title 
III  for  the  same  taxable  year;  Provided,  That  in 
the  case  of  a  corporation  which  makes  return  for  a 
fiscal  year  beginning  in  1917  and  ending  in  1918,  in 
computing  the  tax  as  provided  in  subdivision  (a)  of 
section  205,  the  tax  computed  for  the  entire  period 
under  Title  II  of  the  Revenue  Act  of  1917  shall  be 
credited  against  the  net  income  computed  for  the 
entire  period  under  Title  I  of  the  Revenue  Act  of 
1916  as  amended  by  the  Revenue  Act  of  1917  and 
under  Title  I  of  the  Revenue  Act  of  1917,  and  the 


IncomeTax  63 

tax  computed  for  the  entire  period  under  Title  III 
of  this  Act  at  the  rates  prescribed  for  the  calendar 
year  1918  shall  be  credited  against  the  net  income 
computed  for  the  entire  period  under  this  title ;  and 
(c)  In  the  case  of  a  domestic  corporation,  $2,000.  Specific  credit  of 

$2,000 
Payment  of  Tax  at  Source. 

Sec.  237.    That  in  the  case  of  foreign  corpora-  ^. , ,  ... 
tions  subject  to  taxation  under  this  title  not  eng^^ged  source,  see  page  36 
in  trade  or  business  within  the  United  States  and 
not  having  any  office  or  place  of  business  therein, 
there  shall  be  deducted  and  withheld  at  the  source 
in  the  same  manner  and  upon  the  same  items  of  in- 
come as  is  provided  in  section  221  a  tax  equal  to  10  Rate  of  withholding 
per  centum  thereof,  and  such  tax  shaU  be  returned  lo  per  cent 
and  paid  in  the  same  manner  and  subject  to  the 
same  conditions  as  provided  in  that  section;  Pro-  withholding  on  lax- 
vided.  That  in  the  case  of  interest  described  in  sub-  free  covenant  bond 
division  (b)  of  that  section  the  deduction  and  with-  interest,  2  per  cent 
holding  shall  be  at  the  rate  of  2  per  centum. 

Credit  for  Taxes. 

Sec.  238.  (a)  That  in  the  case  of  a  domestic  cor-  credit  for  taxes  paid 
poration  the  total  taxes  imposed  for  the  taxable  foreign  countries  or 
year  by  this  title  and  b}^  Title  III  shall  be  credited  possessions  of  the 
with  the  amount  of  any  income,  war-profits  and  ex-  ^'  ^' 
cess-profits  taxes  paid  during  the  taxable  year  to 
any  foreign  country,  upon,  income  derived  from 
sources  therein,  or  to  any  possession  of  the  United 
oxares.  . 

If   accrued   taxes   when   paid   differ   from   the  Redetermination  of 
amounts  claimed  as  credits  bv  the  corporation,  or  tax  if  credit  differs 

.„  .  .,.  n         T     1   •    ''     1     t  •  iii        from  amount  actually 

if  any  tax  paid  is  refunded  m  whole  or  m  part,  the  ^^jj 
corporation  shall  at  once  notify  the  Commissioner 
who  shall  redetermine  the  amount  of  the  taxes  due 
under  this  title  and  under  Title  III  for  the  year  or 
vears  affected,  and  the  amount  of  taxes  due  upon 


54 


Rkvexus   Act 


such  redetermination,  if  any,  shall  l)e  paid  hy  the 
corporation  upon  notice  and  demand  by  the  col- 
lector, or  the  amoimt  of  taxes  overpaid,  if  any,  shall 
be  credited  or  refunded  to  the  corporation  in  ac- 
cordance wi^h  the  provisions  of  section  2.52.  In  the 
case  of  such  a  tax  accrued  but  not  paid,  the  Com- 
missioner as  a  condition  precedent  to  the  allowance 
of  this  credit  may  require  the  corporation  to  give  a 
Security  for  payment  boud  with  surctics  Satisfactory  to  and  to  be  ap- 
proved by  him  in  such  penal  sum  as  he  may  require, 
conditioned  for  the  payment  by  the  taxpayer  of  any 
amount  of  taxes  found  due  upon  any  such  redeter- 
mination ;  and  the  bond  herein  prescribed  shall  con- 
tain such  further  conditions  as  the  Commissioner 
may  require. 

(b)  This  credit  shall  be  allowed  only  if  the  tax- 
payer furnishes  evidence  satisfactory  to  the  Com- 
missioner showing  the  amount  of  income  derived 
from  sources  witliin  such  foreign  country  or  such 
possession  of  the  United  States,  as  the  case  may  be, 
and  all  other  information  necessary  for  the  compu- 
tation of  such  credit. 

(c)  If  a  domestic  corporation  makes  a  return  for 
a  fiscal  year  beginning  in  1917  and  ending  in  1918, 
only  that  proportion  of  this  credit  shall  be  allowed 
which  the  part  of  such  period  within  the  calendar 

'year  1918  bears  to  the  entire  period. 


ETidence  required  to 
obtain  credit 


Credit  wliere  fiscal 
year  includes  parts 
of  1917  and  1918 


Returns  required  from 
taxable  corporations 
and  personal  service 
corporations 


Corporation  Returns. 

Sec.  239.  That  every  corporation  subject  to  tax- 
ation under  this  title  and  every  personal  ser\'ice  cor- 
poration shall  make  a  return,  stating  specifically  the 
items  of  its  gross  income  and  the  deductions  and 
credits  allowed  bv  this  title.  The  return  shall  be 
sworn  to  by  the  president,  vice  president,  or  other 
principal  officer  and  by  the  treasurer  or  assistant 
treasurer.   If  any  foreign  corporation  has  no  office 


IxcomeTax  55 

or  place  of  business  in  the  United  States  but  has  Foreign  corporations 

an  agent  in  the  United  States,  the  return  shall  be  with  agenu  in  the 

made  by  the  agent.    In  cases  where  receivers,  trus-  ^"'*^**  ^*^*^* 

tees  in  bankruptcy,  or  assignees  are  operating  the 

property  or  business  of  corporations,  such  receivers, 

trustees,  or  assignees  shall  make  returns  for  such 

corporations  in  the  same  manner  and  form  as  cor-  Receivers 

porations  are  required  to  make  returns.    Any  tax 

due  on  the  basis  of  such  returns  made  by  receivers, 

trustees,  or  assignees  shall  be  collected  in  the  same 

manner  as  if  collected  from  the  corporations  of 

•whose  business  or  property  they  have  custody  and 

control. 

Returns  made  under  this  section  shall  be  subject 
J  to  the  provisions  of  sections  226  and  228.  See  pages  4i  and  42 

When  return  is  made  under  section  226  the  credit 
provided  in  subdivision  (c)  of  section  236  shall  be 
treduced  to  an  amount  which  bears  the  same  ratio  to  See  page  52 
the  full  credit  therein  provided  as  the  number  of 
months  in  the  period  for  which  such  return  is  made 
bears  to  twelve  months. 

Consolidated  Returns. 

Sec.  240.  (a)  That  corporations  which  are  affih-  Affiliated  corporations 
ated  within  the  meaning  of  this  section  shall,  under  to  make  consolidated 
regulations  to  be  prescribed  by  the  Commissioner  returns 
with  the  approval  of  the  Secretary,  make  a  consoh-  / 

dated  return  of  net  income  and  invested  capital  for 
the  purposes  of  this  title  and  Title  III,  and  the 
taxes  thereunder  shall  be  computed  and  determined 
upon  the  basis  of  such  return ;  Provided,  That  there  Affiliated  corporation 
shall  be  taken  out  of  such  consohdated  net  income  which  derives  income 
and  invested  capital,  the  net  income  and  invested  /onTrfcT^*^""*^"' 
capital  of  any  such  affiliated  corporation  organized 
after  August  1,  1914,  and  not  successor  to  a  then 
existing  business,  50  per  centimi  or  more  of  whose 
gross  income  consists  of  gains,  profits,  conunissions, 


Rb vEKui   Act 


Assessment  of  tax 
on  a^Iiated  cor- 
porations 


Only  one  specific 
exemption  allowed 


For  sections  311  and 
312  see  pages  74 
and  75 


Corporations  deemed 
to  be  affiliated 

(1)  Where  one 
controls  stock  of 
other 

(2)  Where  stock  of 
both  is  owned  by 
same  interest 

Credit  for  foreign 
taxes  allowed 
domestic  corporation 
wluch  controls  stock 
of  foreign  corporation 


or  other  income,  derived  from  a  Govermnent  con- 
tract or  contracts  made  between  April  6,  1917,  and 
November  11,  1918,  both  dates  inclusive.  In  such 
case  the  corporation  so  taken  out  shall  be  separately 
assessed  on  the  basis  of  its  own  invested  capital  and 
net  income*  and  the  remainder  of  such  affiliated 
group  shall  be  assessed  on  the  basis  of  the  remain- 
ing consolidated  invested  capital  and  net  income. 

In  any  case  in  which  a  tax  is  assessed  upon  the 
basis  of  a  consolidated  return,  the  total  tax  shall  be 
computed  in  the  first  instance  as  a  unit  and  shall 
then  be  assessed  upon  the  respective  affiliated  cor- 
porations in  such  proportions  as  may  be  agreed  up- 
on among  them,  or,  in  the  absence  of  any  such  agree- 
ment, then  on  the  basis  of  the  net  income  properly 
assignable  to  each.  There  shall  be  allowed  in  com- 
puting the  income  tax  only  one  specific  credit  of 
$2,000  (as  provided  in  section  286) ;  in  computing 
the  war-profits  credit  (as  provided  in  section  811) 
only  one  specific  exemption  of  $3,000;  and  in  com- 
puting the  excess-profits  credit  (as  provided  in  sec- 
tion 812)  only  one  specific  exemption  of  $8,000. 

(b)  For  the  purpose  of  this  section  two  or  more 
domestic  corporations  shall  be  deemed  to  be  affih- 
ated  ( 1 )  if  one  corporation  owns  directly  or  controls 
through  closely  affiliated  interests  or  by  a  nominee 
or  nominees  substantially  all  the  stock  of  the  otlier 
or  others,  or  (2)  if  substantially  all  the  stock  of 
two  or  more  corporations  is  owned  or  controlled  by 
the  same  interests. 

(c)  For  the  purposes  of  section  238  a  domestic 
corporation  which  owns  a  majority  of  the  voting 
stock  of  a  foreign  corporation  shall  be  deemed  to 
have  paid  the  same  proportion  of  any  income,  war- 
profits  and  excess-profits  taxes  paid  (but  not  in- 
cluding taxes  accrued)  by  such  foreign  corporation 
during  the  taxable  year  to  any  foreign  coimtry  or 


IxcomeTax  67 

to  any  possession  of  the  United  States  upon  income 
derived  from  sources  without  the  United  States, 
which  the  amount  of  any  dividends  (not  deductible 
under  section  234)  received  by  such  domestic  cor- 
poration from  such  foreign  corporation  during  the 
taxable  year  bears  to  the  total  taxable  income  of 
such  foreign  corporation  upon  or  with  respect  to 
which  such  taxes  were  paid;  Provided,  That  in  no 
such  case  shall  the  amount  of  the  credit  for  such 
taxes  exceed  the  amount  of  such  dividends  (not  de- 
ductible under  section  234)  received  by  such  domes- 
tic corporation  during  the  taxable  year. 

Time  and  Place  for  Filing  Returns. 

Sec.  241.  (a)  That  returns  of  corporations  shall  Returns,  when 
be  made  at  the  same  time  as  is  provided  in  subdi-  ^  '  *^*  ^^^^ 
vision  (a)  of  section  227. 

(b)  Returns  shall  be  made  to  the  collector  of  the  Where  filed 
district  in  which  is  located  the  principal  place  of 
business  or  principal  office  or  agency  of  the  corpo- 
ration, or,  if  it  has  no  principal  place  of  business  or 
principal  office  or  agency  in  the  United  States,  then 
to  the  collector  at  Baltimore,  Maryland. 

PART  IV.— ADMINISTRATIVE  PROVISIONS. 

Pajmtient  of  Taxes. 

Sec.  250.  (a)  That  except  as  otherwise  provided  installment  tax 
in  this  section  and  sections  221  and  237  the  tax  shall  payments 
be  paid*  in  four  installments,  each  consisting  of  one- 
fourth  of  the  total  amount  of  the  tax.    The  first  in- 
stallment shall  be  paid  at  the  time  fixed  by  law  for  t-     w 
filing  the  return,  and  the  second  installment  shaU 
be  paid  on  the  fifteenth  day  of  the  third  month,  the 
third  installment  on  the  fifteenth  day  of  the  sixth 

•For  use  of  uncertified  checks  and  U.  S.  certificates  of  indebted- 
ness to  pay  taxes,  see  section  1314. 


88 


Revbvub   Act 


Postponement  of 
payment 


Interest  charge  on 
postponed  install- 
ments 


Non-payment  of 
installments 

Single  payment,  time 
of  making 


Examination  of 
returns 


Credit  or  refund  of 
exceM  payments 


month,  and  the  fourth  instalhnent  on  the  fifteenth 
day  of  the  ninth  month,  after  the  time  fixed  by  law 
for  filing  the  return.  Where  an  extension  of  time 
for  filing  a  return  is  granted  the  time  for  payment 
of  the  first  instalhnent  shall  be  postponed  until  the 
date  of  the  eviration  of  the  period  of  the  extension, 
but  the  time  for  payment  of  the  other  instalhnents 
shall  not  be  postponed  unless  the  Commissioner  so 
provides  in  granting  the  extension.  In  any  case  in 
which  the  time  for  the  payment  of  any  installment 
is  at  the  request  of  the  taxpayer  thus  postponed, 
there  shall  be  added  as  part  of  such  installment  in- 
terest thereon  at  the  rate  of  one-half  of  1  per  centum 
per  month  from  the  time  it  would  have  been  due  if 
no  extension  had  been  granted,  until  paid.  If  any 
installment  is  not  paid  when  due,  the  whole  amount 
of  the  tax  unpaid  shall  become  due  and  payable 
upon  notice  and  demand  by  the  collector. 

The  tax  may  at  the  option  of  the  taxpayer  be 
paid  in  a  single  payment  instead  of  in  installments, 
in  which  case  the  total  amount  shall  be  paid  on  or 
before  the  time  fixed  by  law  for  filing  the  return, 
or,  where  an  extension  of  time  for  filing  the  return 
has  been  granted,  on  or  before  the  expiration  of  the 
period  of  such  extension. 

(b)  As  soon  as  practicable  after  the  return  is 
filed,  the  Commissioner  shall  examine  it.  If  it  then 
appears  that  the  correct  amotmt  of  the  tax  is  greater 
or  less  than  that  shown  in  the  return,  the  install- 
ments shall  be  recomputed.  If  the  amount  already 
paid  exceeds  that  which  should  have  been  paid  on 
the  basis  of  the  installments  as  recomputed,  the  ex- 
cess so  paid  shall  be  credited  against  the  subsequent 
installments;  and  if  the  amount  already  paid  ex- 
ceeds the  correct  amount  of  the  tax,  the  excess  shall 
be  credited  or  refunded  to  the  taxpayer  in  accord- 
ance with  the  provisions  of  section  252. 


IncomeTax  69 

If  the  amount  already  paid  is  less  than  that  which  Understatements 
should  have  been  paid,  the  difference  shall,  to  the 
extent  not  covered  by  any  credits  then  due  to  the 
taxpayer  under  section  252,  be  paid  upon  notice  and  No  penalty  for  under- 
demand  by  the  collector.    In  such  case  if  the  return  '^^'^^j^/^h*  ""^"^^ 
is  made  in  good  faith  and  the  understatement  of  the 
amount  in  the  return  is  not  due  to  any  fault  of  the 
taxpayer,  there  shall  be  no  penalty  because  of  such 
understatement.     If  the  understatement  is  due  to 
negligence  on  the  part  of  the  taxpayer,  but  withoiit 
intent  to  defraud,  there  shall  be  added  as  part  of 
the  tax  5  per  centum  of  the  total  amount  of  the 
deficiency,  plus  interest  at  the  rate  of  1  per  centum 
per  month  on  the  amount  of  the  deficiency  of  each 
installment  from  the  time  the  installment  was  due. 

If  the  understatement  is  false  or  fraudulent  with  Fraudulent  under- 
intent  to  evade  the  tax,  then,  in  lieu  of  the  penalty 
provided  by  section  3176  of  the  Revised  Statutes, 
as  amended,  for  false  or  fraudulent  returns  willfully 
made,  but  in  addition  to  other  penalties  provided  by 
law  for  false  or  fraudulent  returns,  there  shall  be 
added  as  part  of  the  tax  50  per  centum  of  the 
amount  of  the  deficiency. 

(c)  If  the  return  is  made  pursuant  to  section  See  section  1317 
3176   of  the   Revised   Statutes   as   amended,   the  '>f«»^»A^* 
amount  of  tax  determined  to  be  due  under  such  re- 
turn shall  be  paid  upon  notice  and  demand  by  the 
collector. 

(d)  Except  in  the  case  of  false  or  fraudulent  re-  5-year  limit  on  power 
turns  with  intent  to  evade  the  tax,  the  amount  of  «^  Commissioner  to 

•1-1    review  return 

tax  due  under  any  return  shall  be  determmed  and 
assessed  by  the  Commissioner  within  five  years  after 
the  return  was  due  or  w^as  made,  and  jio  suit  or  pro- 
ceeding for  the  collection  of  any  tax  shall  be  begun 
after  the  expiration  of  five  years  after  the  date 
when  the  return  was  due  or  was  made.  In  the  case 
of  such  false  or  fraudulent  returns,  the  amount  of 


60 


R  r VK  Kui    A  CT 


Penalty  for  failure  to 
pay  tax  when  due 


No  penally  when 
claim  for  abatement 
it  made 


Notice  of  date  tax 
if  due 


Evasion  of  tax 


tax  due  may  be  determined  at  any  time  after  the 
return  is  filed,  and  the  tax  may  be  collected  at  any 
time  after  it  becomes  due. 

(e)  If  any  tax  remains  unpaid  after  the  date 
when  it  is  due,  and  for  ten  days  after  notice  and 
demand  by*the  collector,  then,  except  in  the  case  of 
estates  of  insane,  deceased,  or  insolvent  persons, 
there  shall  be  added  as  part  of  the  tax  the  sum  of  5 
per  centum  on  the  amount  due  but  unpaid,  plus  in- 
terest at  the  rate  of  1  per  centum  per  month  upon 
such  amount  from  the  time  it  became  due;  Pro- 
vided, That  as  to  any  such  amount  which  is  the  sub- 
ject of  a  bona  fide  claim  for  abatement  such 
sum  of  5  per  centum  shall  not  be  added  and  the  in- 
terest from  the  time  the  amount  was  due  until  the 
claim  is  decided  shall  be  at  the  rate  of  one-half  of 
1  per  centum  per  month. 

In  the  case  of  the  first  installment  provided  for 
in  subdivision  (a)  the  instructions  printed  on  the 
return  shall  be  deemed  sufficient  notice  of  the  date 
when  the  tax  is  due  and  sufficient  demand,  and  the 
taxpayer's  computation  of  the  tax  on  the  return 
shall  be  deemed  sufficient  notice  of  the  amount  due. 

(f )  In  any  case  in  which  in  order  to  enforce  pay- 
ment of  a  tax  it  is  necessary  for  a  collector  to  cause 
a  warrant  of  distraint  to  be  ser\'ed,  there  shall  also 
be  added  as  part  of  the  tax  the  sum  of  $5. 

(g)  If  the  Commissioner  finds  that  a  taxpayer 
designs  quickly  to  depart  from  the  United  States 
or  to  remove  his  property  therefrom,  or  to  conceal 
himself  or  his  property  therein,  or  to  do  any  other 
act  tending  to  prejudice  or  to  render  wholly  or 
partly  ineffectual  proceedings  to  collect  the  tax  for 
the  taxable  year  then  last  past  or  the  taxable  year 
then  current  unless  such  proceedings  be  brought 
without  delav,  the  Commissioner  shall  declare  the 
taxable  period  for  such  taxpayer  terminated  at  the 


I  N  C  O  M  E     T  A  X  6^1 

end  of  the  calendar  month  then  last  past  and  shall 
cause  notice  of  such  finding  and  declaration  to  be 
given  the  taxpayer,  together  with  a  demand  for  im-  Demand  for 
mediate  payment  of  the  tax  for  the  taxable  period  immediate  payment 
so  declared  terminated  and  of  the  tax  for  the  pre- 
ceding taxable  year  or  so  much  of  said  tax  as  is  un- 
paid, whether  or  not  the  time  otherwise  allowed  by 
law  for  filing  return  and  paying  the  tax  has  ex- 
pired; and  such  taxes  shall  thereupon  become  im- 
mediately due  and  payable.  In  any  action  or  suit  Evidence  of  intent  to 
brought  to  enforce  pajrment  of  taxes  made  due  and  ®^^*^®  '^^ 
payable  by  virtue  of  the  provisions  of  this  subdivi- 
sion the  finding  of  the  Commissioner,  made  as  herein 
provided,  whether  made  after  notice  to  the  taxpayer 
or  not,  shall  be  for  all  purposes  presumptive  evi- 
dence of  the  taxpayer's  design.  A  taxpayer  who  is 
not  in  default  in  making  any  return  or  paying  in- 
come, war-profits,  or  excess-profits  tax  under  any 
Act  of  Congress  may  furnish  to  the  United  States, 
under  regulations  to  be  prescribed  by  the  Commis- 
sioner with  the  approval  of  the  Secretary,  security  Security  for  payment 
approved  by  the  Commissioner  that  he  will  duly 
make  the  return  next  thereafter  required  to  be  filed 
and  pay  the  tax  next  thereafter  required  to  be  paid. 
The  Commissioner  may  approve  and  accept  in  like 
manner  security  for  return  and  payment  of  taxes 
made  due  and  payable  by  virtue  of  the  provisions 
of  this  subdivision,  provided  the  taxpayer  has  paid 
in  full  all  other  income,  war-profits,  or  excess- 
profits  taxes  due  from  him  under  any  Act  of  Con- 
gress. If  security  is  approved  and  accepted  pur- 
suant to  the  provisions  of  this  subdivision  and  sucli 
further  or  other  security  with  respect  to  the  tax  or 
taxes  covered  thereby  is  given  as  the  Commissioner 
shall  from  time  to  time  find  necessary  and  require, 
payment  of  such  taxes  shall  not  be  enforced  by  any 
proceedings  under  the  provisions  of  this  subdivision 


62 


R  K  V  E  N  u  B    Act 


Receipts  to  be  given 
on  request 


Overpayments 
credited  against 
taxes  due 


prior  to  the  expiration  of  the  time  otherwise  allowed 
for  paying  such  respective  taxes. 

Receipts  for  Taxes. 

Sec.  251.  That  every  collector  to  whom  any  pay- 
ment of  any  tax  is  made  under  the  provisions  of  this 
title  shall  upon  request  give  to  the  person  making 
such  payment  a  full  written  or  printed  receipt,  stat- 
ing the  amount  paid  and  the  particular  account  for 
which  such  payment  was  made;  and  whenever  any 
debtor  pays  taxes  on  account  of  pajTnents  made  or 
to  be  made  by  him  to  separate  creditors  the  collector 
shall,  if  requested  by  such  debtor,  give  a  separate 
receipt  for  the  tax  paid  on  account  of  each  creditor 
in  such  form  that  the  debtor  can  conveniently  pro- 
duce such  receipts  separately  to  his  several  creditors 
in  satisfaction  of  their  respective  demands  up  to  the 
amounts  stated  in  the  receipts;  and  such  receipt 
shall  be  sufficient  evidence  in  favor  of  such  debtor  to 
justify  him  in  withholding  from  his  next  payment 
to  his  creditor  the  amount  therein  stated;  but  the 
creditor  may,  upon  giving  to  his  debtor  a  full  vrrii- 
ten  receipt  acknowledging  the  payment  to  him  of 
any  sum  actually  paid  and  accepting  the  amount  of 
tax  paid  as  aforesaid  (specifying  the  same)  as  a  fur- 
ther satisfaction  of  the  debt  to  that  amount,  require 
the  surrender  to  him  of  such  collector's  receipt. 

Refunds. 

Sec.  252.  That  if,  upon  examination  of  any  re- 
turn of  income  made  pursuant  to  this  Act,  the  Act 
of  August  5,  1909,  entitled  "An  Act  to  provide 
revenue,  equalize  duties,  and  encourage  the  indus- 
tries of  the  United  States,  and  for  other  purposes," 
the  Act  of  October  3,  1913,  entitled  "An  Act  to  re- 
duce tariff  duties  and  to  provide  revenue  for  the 


1  K  C  O  M 15     T  A  X  63 

Government,  and  for  other  purposes,"  the  Revenue 
Act  of  1916,  as  amended,  or  the  Revenue  Act  of 
1917,  it  appears  that  an  amount  of  income,  war- 
profits  or  excess-profits  tax  has  been  paid  in  excess 
of  that  properly  due,  then,  notwithstanding  the  pro- 
visions of  section  3228  of  the  Revised  Statutes,  the 
amount  of  the  excess  shall  be  credited  against  any 
income,  war-profits  or  excess-profits  taxes,  or  in-  Balance  refunded 
stallment  thereof,  then  due  from  the  taxpayer  un- 
der any  other  return,  and  any  balance  of  such  ex- 
cess shall  be  immediately  refunded  to  the  taxpayer ;  . 
Provided,  That  no  such  credit  or  refund  shall  be  ^"  '"^""'**  ^^*" 

5  years  from  date 

allowed  or  made  after  five  years  from  the  date  when  ©f  return 
the  return  was  due,  unless  before  the  expiration  of 
such  five  years  a  claim  therefor  is  filed  by  the  tax- 
payer. 


Penalties. 
Sec.  253.    That  any  individual,  corporation,  or  Failure  to  make 

return,  pay  tax,  ( 
furnish  information 


partnership  required  under  this  title  to  pay  or  col-  ^*^*""'  ^*^  ***'  '^^ 


lect  any  tax,  to  make  a  return  or  to  supply  informa- 
tion, who  fails  to  pay  or  collect  such  tax,  to  make 
such  return,  or  to  supply  such  information  at  the 
time  or  times  required  under  this  title,  shall  be  liable 
to  a  penalty  of  not  more  than  $1,000.  Any  individ- 
ual, corporation,  or  partnership,  or  any  officer  or 
employee  of  any  corporation  or  member  or  em- 
ployee of  a  partnership,  who  willfully  refuses  to  Wdiful  attempt  to 

^      *^  111  1  1.  .       defeat  or  evade  th 

pay  or  collect  such  tax,  to  make  such  return,  or  to  ^^ 
supply  such  information  at  the  time  or  times  re- 
quired under  this  title,  or  who  willfully  attempts  in 
any  manner  to  defeat  or  evade  the  tax  imposed  by 
this  title,  shall  be  guilty  of  a  misdemeanor  and  shall 
be  fined  not  more  than  $10,000  or  imprisoned  for 
not  more  than  one  year,  or  both,  together  with  the 
costs  of  prosecution. 


64 


Rkvekub  Act 


Corporations  |o 
report  dividends  paid, 
when  required 


Brokers  to  report 
customers'  profits 
and  losses,  when 
required 


Payments  of  income 
of  $1,000  or  over  to 
be  reported  by  payor 


Returns  of  Payments  of  Dividends. 

Sec.  254.  That  every  corporation  subject  to  the 
tax  imposed  by  this  title  and  every  personal  service 
corporation  sliall,  when  required  by  the  Commis- 
sioner, render  a  correct  return  duly  verified  under 
oath,  of  its  payments  of  dividends,  stating  the  name 
and  address  of  each  stockliolder,  the  number  of 
shares  owned  by  him,  and  the  amount  of  dividends 
paid  to  him. 

Returns  of  Brokers. 

Sec.  255.  That  every  individual,  corporation,  or 
partnership  doing  business  as  a  broker  shall,  when 
required  by  the  Commissioner,  render  a  correct  re- 
turn duly  verified  under  oath,  under  such  rules  and 
regulations  as  the  Conunissioner,  with  the  approval 
of  the  Secretary,  may  prescribe,  showing  the  names 
of  customers  for  whom  such  individual,  corporation, 
or  partnership  has  transacted  any  business,  \vith 
such  details  as  to  the  profits,  losses,  or  other  infor- 
mation which  the  Conmiissioner  may  require,  as  to 
each  of  such  customers,  as  will  enable  the  Commis- 
sioner to  determine  whether  all  income  tax  due  on 
profits  or  gains  of  such  customers  has  been  paid. 

Information  at  Source. 

Sec.  256.  That  all  individuals,  corporations,  and 
partnerships,  in  whatever  capacity  acting,  including 
lessees  or  mortgagors  of  real  or  personal  propertj', 
fiduciaries,  and  employers,  making  payment  to  an- 
other individual,  corporation,  or  partnership,  of  in- 
terest, rent,  salaries,  wages,  premiums,  annuities, 
compensations,  remunerations,  emoluments,  or  other 
fixed,  or  determinable  gains,  profits,  and  income 
(other  than  payments  described  in  sections  254-  and 
255),  of  $1,000  or  more  in  any  taxable  year,  or,  in 
the  case  of  such  payments  made  by  the  United 


IzrcoMx   Tax  89 

States,  the  officers  or  employees  of  the  United 
States  having  information  as  to  such  payments  and 
required  to  make  returns  in  regard  thereto  by  the 
regulations  hereinafter  provided  for,  shall  render  a 
true  and  accurate  return  to  the  Commissioner,  un- 
der such  regulations  and  in  such  form  and  manner 
and  to  such  extent  as  may  be  prescribed  by  him  with 
the  approval  of  the  Secretary,  setting  forth  the 
amount  of  such  gains,  profits,  and  income,  and  the 
name  and  address  of  the  recipient  of  such  payment. 

Such  returns  may   be   required,   regardless   of  Returns  of  bond 
amounts,  (1)  in  the  case  of  payments  of  interest  interest  payments 
upon  bonds,  mortgages,  deeds  of  trust,  or  other 
similar  obligations  of  corporations,  and  (2)  in  the  Returns  of  interest 
case  of  collections  of  items    (not  payable  in  the  and  dividends  of 
United  States)  of  interest  upon  the  bonds  of  for-  ^^^"'^^^^^"" "^ 
eign  countries  and  interest  upon  the  bonds  of  and 
dividends  from  foreign  corporations  by  individuals, 
(corporations,  or  part^erships,  undertaking  as  a  mat- 
ter of  business  or  for  profit  the  collection  of  foreign 
payments  of  such  interest  or  dividends  by  means  of 
coupons,  checks,  or  bills  of  exchange. 

When  necessary  to  make  effective  the  provisions 
of  this  section  the  name  and  address  of  the  recipient 
of  income  shall  be  furnished  upon  demand  of  the 
individual,  corporation,  or  partnership  paying  the 
income. 

The  provisions  of  this  section  shall  apply  to  the  No  return  required 
calendar  year  1918  and  each  calendar  year  there-  jf '"*®';f **  **? 

n  ^t-n  .  1..1  L<»*.  U.  S.  obligations 

after,  but  shall  not  apply  to  the  payment  oi  mter- 
est  on  obligations  of  the  United  States. 

I  Returns  to  be  Public  Records. 

I 

Sec.  257.   That  returns  upon  which  the  tax  has  inspection  of  returns 
■  been  determined  by  the  Commissioner  shall  consti- 
1  tute  public  records ;  but  they  shall  be  open  to  inspec- 
]  tion  only  upon  order  of  the  President  and  under 


1 


66 


Rbvekub   Act 


State  authorities  to 
have  access  to 

corporation  returns 


Stockholders  may 
examine  return  of 
corporation 


Penalty  for  divulging 
information 


Publication  of  names 
of  persons  making 
returns 


rules  and  regulations  prescribed  by  the  Secretary 
and  approved  by  the  President ;  Provided,  That  the 
proper  officers  of  any  State  imposing  an  income  tax 
may,  upon  the  request  of  the  governor  thereof,  have 
access  to  the  returns  of  any  corporation,  or  to  an 
abstract  thereof  showing  the  name  and  income  of 
the  corporation,  at  such  times  and  in  such  manner 
as  the  Secretary  may  prescribe;  Provided  further, 
That  all  bona  fide  stockholders  of  record  owning  1 
per  centum  or  more  of  the  outstanding  stock  of  any 
corporation  shall,  upon  making  request  of  the  Com- 
missioner, be  allowed  to  examine  the  annual  income 
returns  of  such  corporation  and  of  its  subsidiaries. 
Any  stockholder  who  pursuant  to  the  provisions  of 
this  section  is  allowed  to  examine  thcTetum  of  anv 
corporation,  and  who  makes  known  in  any  manner 
whatever  not  provided  by  law  the  amount  or  source 
of  income,  profits,  losses,  expenditures,  or  any  par-  ^ 
ticular  thereof,  set  forth  or  disclosed  in  any  such 
return,  shall  be  guilty  of  a  misdemeanor  and  be 
punished  by  a  fine  not  exceeding  $1,000,  or  by  im- 
prisonment not  exceeding  one  year,  or  both. 

The  Commissioner  shall  as  soon  as  practicable  in 
each  year  cause  to  be  prepared  and  made  available 
to  public  inspection  in  such  manner  as  he  may  de-  j 
termine,  in  the  office  of  the  collector  in  each  internal- 
revenue  district  and  in  such  other  places  as  he  may 
determine,  lists  containing  the  names  and  the  post- 
office  addresses  of  all  individuals  making  income- 
tax  returns  in  such  district. 


Publication  of 
statistics 


Publication  of  Statistics. 


Sec.  258.  That  the  Commissioner,  with  the  ap- 
proval of  the  Secretary,  shall  prepare  and  publish 
annually  statistics  reasonably  available  with  respect 
to  the  operation  of  the  income,  war-profits  and  ex- 
cess-profits tax  laws,  including  classifications  of  tax- 


I N  COME   Tax  '  g7 

payers  and  of  income,  the  amounts  allowed  as  de- 
ductions, exemptions,  and  credits,  and  any  other 
facts  deemed  pertinent  and  valuable. 

Collection  of  Foreign  Items. 

Sec.  259.   That  all  individuals,  corporations,  or  Ucense  required  for 
partnerships  undertaking  as  a  matter  of  business  or  coMecUon  of  foreign 
for  profit  the  collection  of  foreign  payments  of  in-  *'*"' 
terest  or  dividends  by  means  of  coupons,  checks,  or 
bills  of  exchange  shall  obtain  a  license  from  the 
Commissioner  and  shall  be  subject  to  such  regula- 
tions enabling  the  Government  to  obtain  the  in- 
formation required  under  this  title  as  the  Commis- 
sioner, with  the  approval  of  the  Secretary,  shall  Penalty  for  collecUon 
prescribe;  and  whoever  knowingly  undertakes  to  by  unlicensed  agency 
collect  such  payments  without  having  obtained  a 
license  therefor,  or  without  complying  with  such 
regulations,  shall  be  guilty  of  a  misdemeanor  and 
shall  be  fined  not  more  than  $5,000,  or  imprisoned 
for  not  more  than  one  year,  or  both. 

Citizens  of  United  States  Possessions. 

Sec.  260.  That  any  individual  who  is  a  citizen  of  citizens  of  possessions 
any  possession  of  the  United  States  (but  not  other-  of  u.  s.  taxed  only 
wise  a  citizen  of  the  United  States)  and  who  is  not  »" ^'l^o"*^  ^^o™  t*'^ 
a  resident  of  the  United  States,  shall  be  subject  to 
taxation  under  this  title  only  as  to  income  derived 
from  sources  within  the  United  States,  and  in  such 
case  the  tax  shall  be  computed  and  paid  in  the  same 
manner  and  subject  to  the  same  conditions  as  in  the 
case  of  other  persons  who  are  taxable  only  as  to 
income  derived  from  such  sources. 

Porto  Rico  and  Philippine  Islands. 

Sec.  261.  That  in  Porto  Rico  and  the  Philippine  income  tax  in  Porto 
Islands  the  income  tax  shall  be  levied,  assessed,  col-  R»c»  «»«*  Philippine 
lected,  and  paid  in  accordance  with  the  provisions   *  *"  * 
of  the  Revenue  Act  of  1916  as  amended. 


68 


Revbkui   Act 


Returns  bj: 

IndiTiduali 


Corporations 
Nonresident  aliens 


Foreign  corporations 


See  pages  29, 48 


Returns  shall  be  made  and  taxes  shall  be  paid  un- 
der Title  I  of  such  Act  in  Porto  Rico  or  the  Philip- 
pine Islands,  as -the  case  may  be,  by  (1)  every  in- 
dividual who  is  a  citizen  or  resident  of  Porto  Rico 
or  the  Philippine  Islands  or  derives  income  from 
sources  thecein,  and  (2)  every  corporation  created 
or  organized  in  Porto  Rico  or  the  Philippine  Islands 
or  deriving  income  from  sources  therein.  An  indi- 
vidual who  is  neither  a  citizen  nor  a  resident  of 
Porto  Rico  or  the  Philippine  Islands  but  derives 
income  from  sources  therein,  shall  be  taxed  in  Porto 
Rico  or  the  Philippine  Islands  as  a  nonresident  ahen 
individual,  and  a  corporation  created  or  organized 
outside  Porto  Rico  or  the  Philippine  Islands  and 
deriving  income  from  sources  therein  shall  be  taxed 
in  Porto  Rico  or  the  Philippine  Islands  as  a  foreign 
corporation.  For  the  purposes  of  section  216  and 
of  paragraph  (6)  of  subdivision  (a)  of  section  284 
a  tax  imposed  in  Porto  Rico  or  the  Philippine 
Islands  upon  the  net  income  of  a  corporation  shall 
not  be  deemed  to  be  a  tax  under  this  title. 

The  Porto  Rican  or  Philippine  Legislature  shall 
have  power  by  due  enactment  to  amend,  alter, 
modify,  or  repeal  the  income  tax  laws  in  force  in 
Porto  Rico  or  the  Philippine  Islands,  respectively. 


I 


a 


Definitions 


See  pages  8,  9 


TITLE  HI. 

War-Profits  and  Excess-Profits  Tax 

PART  I.— GENERAL  DEFINITIONS. 

Sec.  300.  That  when  used  in  this  title  the  terms 
taxable  year,"  "fiscal  year,"  "personal  service  cor- 
poration," "paid  or  accrued,"  and  "dividends"  shall 
have  the  same  meaning  as  provided  for  the  purposes 
of  income  tax  in  sections  200  and  201.  The  first 
taxable  year  for  the  purposes  of  this  title  shall  be 
the  same  as  the  first  taxable  year  for  the  purposes 
of  the  income  tax  under  Title  II. 

PART  II.— IMPOSITION  OF  TAX. 

Tax  Rates  for  1918 

Sec.  301.    (a)  That  in  lieu  of  the  tax  imposed  by  Tax  applies  only  to 
Title  II  of  the  Revenue  Act  of  1917,  but  in  addition  corporations 
to  the  other  taxes  imposed  by  this  Act,  there  shall 
be  levied,  collected,  and  paid  for  the  taxable  year 
1918  upon  the  net  income  of  every  corporation*  a 
tax  equal  to  the  sum  of  the  following: 

FIRST  BRACKET 

30  per  centimi  of  the  amount  of  the  net  income  in  p^^^j  bracket, 
excess  of  the  excess-profits  credit  ( determined  under  so  per  cent 
section  312)  and  not  in  excess  of  20  per  centum  of 
the  invested  capital; 


•For  corporations  which  are  exempt    (including  personal  service 
corporations),  see  pages  44-45. 

69 


I 


70 


R  B  VE  jr  u«   A  CT 


Second  bracket, 
65  per  cent 


Third  bracket, 
80  per  cent 


SECOND   BRACKET 

Q5  per  centuni  of  the  amount  of  the  net  income  in 
excess  of  20  per  centum  of  the  invested  capital; 

THIRD  BRACKET 

The  sum,  if  any,  by  which  80  per  centum  of  the  i 
amount  of  the  net  income  in  excess  of  the  war-  ' 
profits  credit  (determined  under  section  311)  ex- 
ceeds the  amount  of  the  tax  computed  under  the 

first  and  second  brackets. 

I 

Tax  Rates  for  Subsequent  Years. 

Tax  rales  for  1919  (b)  For  the  taxablc  year  1919  and  each  taxable 

and  subsequent  years   year  thereafter  thcrc  shall  be  levied,  collected,  and 

paid  upon  the  net  income  of  every  corporation  (ex- 
cept corporations  taxable  under  subdivision  (c)  of 
this  section)  a  tax  equal  to  the  sum  of  the  follow- 
ing: 

FIRST  BRACKET 

20  per  centum  of  the  amount  of  tlie  net  income  in 
excess  of  the  excess-profits  credit  (determined  un- 
der section  312)  and  not  in  excess  of  20  per  centum 
of  the  invested  capital; 


First  bracket, 
20  per  cent 


Second  bracket, 
40  per  cent 


8B00ND  BRACKET 

40  per  centum  of  the  amount  of  the  net  income 
in  excess  of  20  per  centum  of  the  invested  capital. 
Tm  on  income  from  (c)  For  the  taxable  year  1919  and  each  taxable 

fovernmeni  contracts    yg^r  thereafter  thcrc  shall  be  levied,  collected,  and 

paid  upon  the  net  income  of  every  corporation 
which  derives  in  such  year  a  net  income  of  more 
than  $10,000  from  any  government  contract  or  con- 
tracts made  between  April  6,  1917,  and  Xoveml) 
11,  1918,  both  dates  inclusive,  a  tax  equal  to  the 
sum  of  the  following: 

(1 )  Such  a  portion  of  a  tax  computed  at  the  rates 
specified  in  subdivision  (a)  as  the  part  of  the  net 


Application  of  1918 
rales 


W  A  R-P  ROFITS     AND     ExCES  S-P  ROPITsTaX  71 

income  attributable  to  such  government  contract 
or  contracts  bears  to  the  entire  net  income.  In  com- 
puting such  tax  the  excess-profits  credit  and  the 
war-profits  credit  apphcable  to  the  taxable  year 
shall  be  used ; 

(2)  Such  a  portion  of  a  tax  computed  at  the  rates 
specified  in  subdivision  (b)  as  the  part  of  the  net 
income  not  attributable  to  such  government  con- 
tract or  contracts  bears  to  the  entire  net  income. 

For  the  purpose  of  determining  the  part  of  the 
net  income  attributable  to  such  government  contract 
or  contracts,  the  proper  apportionment  and  alloca- 
tion of  the  deductions  with  respect  to  gross  income 
derived  from  such  government  contract  or  con- 
tracts and  ftom  other  sources,  respectively,  shall  be 
determined  under  rules  and  regulations  prescribed 
by  the  Conmiissioner  with  the  approval  of  the 
Secretary. 

Application  of  Excess-Profits  Credit. 

(d)  In  any  case  where  the  full  amount  of  the 
excess-profits  credit  is  not  allowed  under  the  first  Deduction  from 
bracket  of  subdivision  (a)  or  (b),  by  reason  of  the  second  bracket 
fact  that  such  credit  is  in  excess  of  20  per  centum 
of  the  invested  capital,  the  part  not  so  allowed  shall 
be  deducted  from  the  amount  in  the  second  bracket. 

Carriers  under  Government  Control. 

(e)  For  the  purposes  of  the  Act  approved  March  Tax  to  be  paid  by 
21, 1918,  entitled  "An  Act  to  provide  for  the  oper-  ;^;;j:';^^^^^ 
ation  of  transportation  systems  while  under  Fed- 
eral control,  for  the  just  compensation  of  their  own- 
ers and  for  other  purposes,"  the  tax  imposed  by  this 
title  shall  be  treated  as  levied  by  an  Act  in  amend- 

j    ment  of  Title  II  of  the  Revenue  Act  of  1917.* 

*Se€  footnote,  page  48. 


7S 


Re  VE  wz   Act 


Maximum  ratio  of 
tax  to  income 


Where  part  of  income 
ia  from  bucineas  re- 
quiring inveated 
capital  and  part  from 
"personal  terTice" 


Tax  on  income  from 
invested  capital 


Tax  on  income  from 
"personal  serrice" 


Limitations  and  Exemptions. 

Sec.  802.  That  the  tax  imposed  by  subdivision 
(a)  of  section  301  shall  in  no  case  be  more  than  30 
per  centum  of  the  amount  of  the  net  income  in  excess 
of  $3,000  and  not  in  excess  of  $20,000,  plus  80  per 
centum  of  the  amount  of  the  net  income  in  excess 
of  $20,000;  the  tax  imposed  by  subdivision  (b)  ol 
section  301  shall  in  no  case  be  more  than  20  per 
centum  of  the  amount  of  the  net  income  in  excess 
of  $3,000  and  not  in  excess  of  $20,000,  plus  40  per 
centimi  of  the  amount  of  the  net  income  in  excess  of 
$20,000 ;  and  the  above  limitations  shall  apply  to  the 
taxes  computed  under  subdivisions  (a)  and  (b)  of 
section  801,  respectively,  when  used  in  subdivision 
(c)  of  that  section.  Nothing  in  this  section  shall  be 
construed  in  such  manner  as  to  increase  the  tax  im- 
posed by  section  801. 

Sec.  303.  That  if  part  of  the  net  income  of  a  cor- 
poration is  derived  (1)  from  a  trade  or  business  (or 
a  branch  of  a  trade  or  business)  in  which  the  em- 
ployment of  capital  is  necessary,  and  (2)  a  part 
(constituting  not  less  than  30  per  centum  of  its  total 
net  income)  is  derived  from  a  separate  trade  or  busi- 
ness (or  a  distinctly  separate  branch  of  the  trade  or 
business)  which  if  constituting  the  sole  trade  oi 
business  would  bring  it  within  the  class  of  "personal 
service  corporations,"  then  (under  regulations  pre- 
scribed by  the  Conmfiissioner  with  the  approval  of 
the  Secretary)  the  tax  upon  the  first  part  of  such 
net  income  shall  be  separately  computed  (allowing 
in  such  computation  only  the  same  proportionate 
part  of  the  credits  authorized  in  sections  311  and 
312) ,  and  the  tax  upon  the  second  part  sliall  be  the 
same  percentage  thereof  as  the  tax  so  computed 
upon  the  first  part  is  of  such  first  part;  Provided, 
That  the  tax  upon  such  second  part  shall  in  no  case 
be  less  than  20  per  centum  thereof,  unless  the  tax 


W  A  R-P  aoFiTS   AND   ExcES  s-P  ropitsTax  73 

upon  the  entire  net  income,  if  computed  without 
benefit  of  this  section,  would  constitute  less  than  20 
per  centimi  of  such  entire  net  income,  in  which 
event  the  tax  shall  be  determined  upon  the  entire 
net  income,  without  reference  to  this  section,  as 
other  taxes  are  determined  under  this  title.  The 
total  tax  computed  under  this  section  shall  be  sub- 
ject to  the  limitations  provided  in  section  302. 

Sec.  304.  (a)  That  the  corporations  enumerated  Corporations  exempt 
in  section  231  shall,  to  the  extent  that  they  are  ex-  «««P«g«  44-45 
empt  from  income  tax  under  Title  II,  be  exempt 
from  taxation  under  this  title. 

(b)Any  corporation  whose  net  income  for  the 
taxable  year  is  less  than  $3,000  shall  be  exempt  from 
taxation  under  this  title. 

(d)  [c?]  In  the  case  of  any  corporation  engaged  income  from  gold 
in  the  mining  of  gold,  the  portion  of  the  net  income  """*"*^ 
derived  from  the  mining  of  gold  shall  be  exempt 
from  the  tax  imposed  by  this  title,  and  the  tax  on 
the  remaining  portion  of  the  net  income  shall  be  the 
proportion  of  a  tax  computed  without  the  benefit  of 
this  subdivision  which  such  remaining  portion  of  the 
net  income  bears  to  the  entire  net  income. 

Sec.  305.   That  if  a  tax  is  computed  under  this  Exemption  when  tax 
title  for  a  period  of  less  than  twelve  months,  the  ^2*^1^ Jj^s*" '  ^" 
specific  exemption  of  $3,000,  wherever  referred  to 
in  this  title,  shall  be  reduced  to  an  amount  which 
is  the  same  proportion  of  $3,000  as  the  number  of 
months  in  the  period  is  of  twelve  months. 

PART  III.— CREDITS. 

Sec.  310.    That  as  used  in  this  title  the  term  Prewar  period 
"prewar  period"  means  the  calendar  years  1911,  defined 
1912,  and  1913,  or,  if  a  corporation  was  not  in  ex- 
istence during  the  whole  of  such  period,  then  as 
many  of  such  years  during  the  whole  of  which  the 
corporation  was  in  existence. 


^*  RbvbitueAct 

War.profiu  credit  Sec.  311.   (a)   That  the  war-profits  credit  shall 

consist  of  the  sum  of: 

(1)  $3,000  (1)  A  specific  exemption  of  $3,000;  and 

(2)  Average  prewar  (2)  An  amoiHit  cqual  to  the  avcFage  net  income 
income  as  a  jusie        ^£  ^j^^  corpopation  foF  the  prcwar  period,  phis  or 

minus,  as  the  case  may  be,  10  per  centum  of  the  dif- 
ference between  the  average  invested  capital  for  the 
prewar  period  and  the  invested  capital  for  the  tax- 
able year.  If  the  tax  is  computed  for  a  period  of  less 
than  twelve  months  such  amount  shall  be  reduced 
to  the  same  proportion  thereof  as  the  number  of 
months  in  the  period  is  of  twelve  months. 

(b)  If  the  corporation  had  no  net  income  for  the 
prewar  period,  or  if  the  amount  computed  under 
paragraph  (2)  of  subdivision  (a)  is  less  than  10 
per  centum  of  its  invested  capital  for  the  taxable 
year,  then  the  war-profits  credit  sliall  be  the  sum  of: 

( 1 )  A  specific  exemption  of  $8,000 ;  and 

(2)  An  amount  equal  to  10  per  centum  of  Uie 
invested  capital  for  the  taxable  year. 

(c)  If  the  corporation  was  not  in  existence  dur- 
ing the  whole  of  at  least  one  calendar  year  during 
the  prewar  period,  then,  except  as  provided  in  sub- 
division (d),  the  war-profits  credit  shall  be  the  sum 
of: 

( 1 )  A  specific  exemption  of  $3,000 ;  and 

(2)  An  amount  equal  to  the  same  percentage  of 
the  invested  capital  of  the  taxpayer  for  the  taxable 
year  as  the  average  percentage  of  net  income  to 
invested  capital,  for  the  prewar  period,  of  corpora- 
tions engaged  in  a  trade  or  business  of  the  same 
general  class  as  that  conducted  by  the  taxpayer; 
but  such  amount  shall  in  no  case  be  less  than  10  per 
centum  of  the  invested  capital  of  the  taxpayer  for 


J 


W  A  R-P  R0FIT8     AND     ExCES  S-P  EOFITSTaX  75 

the  taxable  year.    Such  average  percentage  shall  be  Deierminaiion  of 
determined  by  the  Commissioner  on  the  basis  of  7"^!  ?««•""»»«« 

,  .        ,    .  T  of  earnings 

data  contamed  m  returns  made  under  Title  II  of 
the  Revenue  Act  of  1917,  and  the  average  known 
as  the  median  shall  be  used.  If  such  average  per- 
centage has  not  been  determined  and  published  at 
least  30  days  prior  to  the  time  when  the  return  of 
the  taxpayer  is  due,  then  for  purposes  of  such  re- 
turn 10  per  centum  shall  be  used  in  lieu  thereof;  but 
such  average  percentage  when  determined  shall  be 
used  for  the  purposes  of  section  250  in  determining 
the  correct  amount  of  the  tax.  See  page  57 

(d)  The  war-profits  credit  shall  be  determined  in  AppHcaUonof 
the  manner  provided  in  subdivision  (b)  instead  of  ™niniuni credit 
in  the  manner  provided  in  subdivision  (c),  in  the 

case  of  any  corporation  which  was  not  in  existence 
during  the  whole  of  at  least  one  calendar  year  dur- 
ing the  prewar  period,  if  (1)  a  majority  of  its  stock 
at  any  time  during  the  taxable  year  is  owned  or  con- 
trolled, directly  or  indirectly,  by  a  corporation  which 
was  in  existence  during  the  whole  of  at  least  one 
calendar  year  during  the  prewar  period,  or  if  (2)  50 
per  centum  or  more  of  its  gross  income  (as  com- 
puted under  section  233  for  income  tax  purposes)  Seepage 46 
consists  of  gains,  profits,  commissions,  or  other  in- 
come, derived  from  a  government  contract  or  con- 
tracts made  between  April  6,  1917,  and  November 
11,  1918,  both  dates  inclusive. 

(e)  A  foreign  corporation  shall  not  be  entitled  Foreign 
to  a  specific  exemption  of  $3,000.  corporauons 

Sec.  312.  That  the  excess-profits  credit  shall  con-  E^^ss-profits  credit 
sist  of  a  specific  exemption  of  $3,000  plus  an  amount 
equal  to  8  per  centum  of  the  invested  capital  for  the 
taxable  year. 

A  foreign  corporation  shall  not  be  entitled  to  the 
specific  exemption  of  $3,000. 


76 


Rkvivub   Act 


How  to  delermine 
net  mcoro« 


For  1911  and  1912 


For  1913 


For  taxable  year 
See  pages  45-46 


How  to  determine 
arerage  prewar 
net  income 


PART  IV.— NET  INCOME. 

Sec.  320.  (a)  That  for  the  purpose  of  this  title 
the  net  income  of  a  corporation  shall  be  ascertained 
and  returned — 

(1)  For  the  calendar  years  1911  and  1912  upon 
the  same  basis  and  in  the  same  manner  as  provided 
in  section  88  of  the  Act  entitled  "An  Act  to  pro- 
vide revenue,  equalize  duties,  and  encourage  the  in- 
dustries of  the  United  States,  and  for  other  pur- 
poses," approved  August  5,  1909,  except  that  taxes 
imposed  by  such  section  and  paid  by  the  corpora- 
tion within  the  year  shall  be  included ; 

(2)  For  the  calendar  year  1913  upon  the  same 
basis  and  in  the  same  manner  as  provided  in  Sec- 
tion II  of  the  Act  entitled  "An  Act  to  reduce  tariff 
duties  and  to  provide  revenue  for  the  Government, 
and  for  other  purposes,"  approved  October  8, 1918, 
except  that  taxes  imposed  by  section  38  of  such  Act 
of  August  5,  1909,  and  paid  by  the  corporation 
within  the  year  shall  be  included,  and  except  that 
the  amounts  received  by  it  as  dividends  upon  the 
stock  or  from  the  net  earnings  of  other  corporations 
subject  to  the  tax  imposed  by  Section  II  of  such 
Act  of  October  3,  1913,  shall  be  deducted;  and 

(3)  For  the  taxable  year  upon  the  same  basis  and 
in  the  same  manner  as  provided  for  income  tax  pur- 
poses in  Title  II  of  this  Act. 

(b)  The  average  net  income  for  the  prewar  pe- 
riod shall  be  determined  by  dividing  the  number  of 
years  within  that  period  during  the  whole  of  which 
the  corporation  was  in  existence  into  the  sum  of  the 
net  income  for  such  years,  even  though  there  may 
have  been  no  net  income  for  one  or  more  of  such 
years. 


WAB-PaOPlT8    AND     £  X  C  E  S  S-P  R  O  F  I  T  S     TaX  77 

PART  v.— INVESTED  CAPITAL. 

Sec.  325.  (a)  That  as  used  in  this  title — 


The  term  "intangible  property"  means  patents,  definitions 
copyrights,  secret  processes  and  formulae,  good  will,  intang»'>^c 
trade-marks,   trade-brands,   franchises,   and  other 
like  property; 

The  term   "tangible   property"   means    stocks,  tangible 
bonds,  notes,  and  other  evidences  of  indebtedness,  ^^^^^  ^ 
bills  and  accounts  receivable,  leaseholds,  and  other 
property  other  than  intangible  property ; 

The  term  "borrowed  capital"  means  money  or  fj^^ta^** 
other  property  borrowed,  whether  represented  by 
bonds,  notes,  open  accounts,  or  otherwise; 

The  term  "inadmissible  assets"  means  stocks,  asgeu'"' 
bonds,  and  other  obligations  (other  than  obliga- 
tions of  the  United  States),  the  dividends  or 
interest  from  which  is  not  included  in  computing 
net  income,  but  where  the  income  derived  from  such 
assets  consists  in  part  of  gain  or  profit  derived  from 
the  sale  or  other  disposition  thereof,  or  where  all  or 
part  of  the  interest  derived  from  such  assets  is  in 
effect  included  in  the  net  income  because  of  the  hmi- 
tation  on  the  deduction  of  interest  under  paragraph 
(2)  of  subdivision  (a)  of  section  234,  a  correspond- 
ing part  of  the  capital  invested  in  such  assets  shall 
not  be  deemed  to  be  inadmissible  assets;  the  term 
"admissible  assets"  means  all  assets  other  than  inad-  A**""»»»*»^« 

assets 

niissible  assets,  valued  in  accordance  with  the  pro- 
visions of  subdivision  (a)  of  section  326,  section  330, 
and  section  331. 

(b)  For  the  purposes  of  this  title,  the  par  value  Valuation  of 
of  stock  or  shares  shall,  in  the  case  of  stock  or  shares  "^"-p*'"  ''^'^^ 
issued  at  a  nominal  value  or  having  no  par  value, 
be  deemed  to  be  the  fair  market  value  as  of  the  date 
or  dates  of  issue  of  such  stock  or  shares. 


78 


Revemub   Act 


Invested  capital 
includeft; 


Cath 

Cath  value  of 
tangible  property 
paid  for  in  stock 


See  page  65 

Surplus  and  undivided 
profits 


Intangible  property 
acquired  before 
March  3,  1917 


Sec.  32G.  (a)  That  as  used  in  this  title  the  term 
"invested  capital"  for  any  year  means  (except  as 
provided  in  subdivisions  (b)  and  (c)  of  this  sec- 
tion) : 

(1)  Actual  cash  bona  fide  paid  in  for  stock  or 
shares; 

(2)  Actual  cash  value  of  tangible  property,  other 
than  cash,  bona  fide  paid  in  for  stock  or  shares,  at 
the  time  of  such  payment,  but  in  no  case  to  exceed 
the  par  value  of  the  original  stock  or  shares  specifi- 
cally issued  therefor,  unless  the  actual  cash  value  of 
such  tangible  property  at  the  time  paid  in  is  shown 
to  the  satisfaction  of  the  Commissioner  to  have  been 
clearly  and  substantially  in  excess  of  such  par  value, 
in  which  case  such  excess  shall  be  treated  as  paid-in 
surplus;  Provided,  That  the  Commissioner  shall 
keep  a  record  of  all  cases  in  which  tangible  property 
is  included  in  invested  capital  at  a  value  in  excess  of 
the  stock  or  shares  issued  therefor,  containing  tlic 
name  and  address  of  each  taxpayer,  the  business  in 
which  engaged,  the  amount  of  invested  capital  and 
net  income  shown  by  the  return,  the  value  of  the 
tangible  property  at  the  time  paid  in,  the  par  value 
of  the  stock  or  shares  specifically  issued  therefor, 
and  the  amount  included  under  this  ])aragraph  as 
paid-in  surplus.  The  Commissioner  shall  furnish 
a  copy  of  such  record  and  other  detailed  informa- 
tion with  respect  to  such  cases  when  required  by 
resolution  of  either  house  of  Congress,  without  re- 
gard to  the  restrictions  contained  in  section  257 ; 

(3)  Paid-in  or  earned  surplus  and  undivided 
profits;  not  including  surplus  and  undivided  profits 
earned  during  the  year; 

(4)  Intangible  property  bona  fide  paid  in  for 
stock  or  shares  prior  to  March  3, 1917,  in  an  amount 
not  exceeding  (a)  the  actual  cash  value  of  such 
property  at  the  time  paid  in,  (b)  the  par  value  of 


War-Profits   and   Excess-Profits    Tax  79 

the  stock  or  shares  issued  therefor,  or  (c)  in  the 
aggregate  25  per  centum  of  the  par  value  of  the 
total  stock  or  shares  of  the  corporation  outstanding 
on  March  3,  1917,  whichever  is  lowest; 

(5)   Intangible  property  bona  fide  paid  in  for  intangible  property 
stock  or  shares  on  or  after  March  3,  1917,  in  an  acquired  after 
amount  not  exceeding  (a)  the  actual  cash  value  of  ^"*^*'^'^^^^ 
such  property  at  the  time  paid  in,  (b)  the  par  value 
of  the  stock  or  shares  issued  therefor,  or  (c)  in  the 
aggregate  25  per  centum  of  the  par  value  of  the 
total  stock  or  shares  of  the  corporation  outstanding 
at  the  beginning  of  the  taxable  year,  whichever  is 
lowest;  Provided,  That  in  no  case  shall  the  total 
amount  included  under  paragraphs    (4)   and   (5) 
exceed  in  the  aggregate  25  per  centum  of  the  par 
value  of  the  total  stock  or  shares  of  the  corporation 
outstanding  at  the  beginning  of  the  taxable  year; 
but 

(b)  As  used  in  this  title  the  term  "invested  capi-  Borrowed  capital 
tal"  does  not  include  borrowed  capital.  not  included 

(c)  There  shall  be  deducted  from  invested  capi-  Deduction  for  in- 
tal  as  above  defined  a  percentage  thereof  equal  to  a*'™*"*''^  assets 
the  percentage  which  the  amount  of  inadmissible 

assets  is  of  the  amount  of  admissible  and  inadmis- 
sible assets  held  during  the  taxable  year. 

(d)  The  invested  capital  for  any  period  shall  be  Average  invested 
the  average  invested  capital  for  such  period,  but  in  "p**** 

the  case  of  a  corporation  making  a  return  for  a 
fractional  part  of  a  year,  it  shall  (except  for  the 
purpose  of  paragraph  (2)  of  subdivision  (a)  of 
section  311)  be  the  same  fractional  part  of  such 
average  invested  capital. 

The  average  invested  capital  for  the  prewar  pe-  Average  prewar 
riod  shall  be  determined  by  dividing  the  number  of  invested  capital 
years  within  that  period  during  the  whole  of  which 
the  corporation  was  in  existence  into  the  sum  of  the 
average  invested  capital  for  such  years. 


Rsvcirui   Act 


Exceptional  cases 


See  page  46 


In  above  cases  tax 
rate  to  equal  average 
rate'on  representative 


concerns 


Sec.  327.  That  in  the  following  cases  the  tax  shall 
be  determined  as  provided  in  section  328: 

(a)  Where  the  Commissioner  is  imable  to  de- 
termine the  invested  capital  as  provided  in  section 
326; 

(b)  In  the  case  of  a  foreign  corporation; 

(c)  Where  a  mixed  aggregate  of  tangible  prop- 
erty and  intangible  property  has  been  paid  in  for 
stock  or  for  stock  and  bonds  and  the  Commissioner 
is  unable  satisfactorily  to  determine  the  respective 
values  of  the  several  classes  of  property  at  the  time 
of  payment,  or  to  distinguish  the  classes  of  prop- 
erty paid  in  for  stock  and  for  bonds,  respectively; 

(d)  Where  upon  application  by  the  corporation 
the  Commissioner  finds  and  so  declares  of  record 
that  the  tax  if  determined  without  benefit  of  this 
section  would,  owing  to  abnormal  conditions  af- 
fecting the  capital  or  income  of  the  corporation, 
work  upon  the  corporation  an  exceptional  hardship 
evidenced  by  gross  disproportion  between  the  tax 
computed  without  benefit  of  this  section  and  the  tax 
computed  by  reference  to  the  representative  cor- 
porations specified  in  section  328.  This  subdivision 
shall  not  apply  to  any  case  (1)  in  which  the  tax 
(computed  without  benefit  of  this  section)  is  high 
merely  because  the  corporation  earned  wnthin  the 
taxable  year  a  high  rate  of  profits  upon  a  normal 
invested  capital  nor  (2)  in  which  50  per  centum  or 
more  of  the  gross  income  of  the  corporation  for  the 
taxable  year  (computed  under  section  233  of  Title 
II)  consists  of  gains,  profits,  commissions,  or  other 
income,  derived  on  a  cost-plus  basis  from  a  govern- 
ment contract  or  contracts  made  between  April  6, 
1917,  and  November  11,  1918,  both  dates  inclusive. 

Sec.  328.  (a)  In  the  cases  specified  in  section  327 
the  tax  shall  be  the  amount  which  bears  the  same 
ratio  to  the  net  income  of  the  taxpaver  (in  excess 


W  A  H-P  aOFITS     AND     ExCES  8-P  ROFITSTaX  81 

of  the  specific  exemption  of  $3,000)  for  the  taxable 
year,  as  the  average  tax  of  representative  corpora- 
tions engaged  in  a  like  or  similar  trade  or  business, 
bears  to  their  average  net  income  (in  excess  of  the- 
specific  exemption  of  $3,000)  for  such  year.  In 
the  case  of  a  foreign  corporation  the  tax  shall  be 
computed  without  deducting  the  specific  exemption 
of  $3,000  either  for  the  taxpayer  or  the  representa- 
tive corporations. 

In  computing  the  tax  under  this  section  the  Com- 
missioner shall  compare  the  taxpayer  only  with 
representative  corporations  whose  invested  capital 
can  be  satisfactorily  determined  under  section  326 
and  which  are,  as  nearly  as  may  be,  similarly  cir- 
cumstanced with  respect  to  gross  income,  net  in- 
come, profits  per  unit  of  business  transacted  and 
capital  employed,  the  amount  and  rate  of  war- 
profits  or  excess-profits,  and  all  other  relevant  facts 
and  circumstances. 

(b)    For  the  purposes  of  subdivision    (a)    the  Deierminaiion  of 
ratios  between  the  average  tax  and  the  average  net  «▼«»•»««  *«  "*« 
income  of  representative  corporations  shall  be  de- 
termined by  the  Conmiissioner  in  accordance  with 
regulations  prescribed  by  him  with  the  approval  of 
the  Secretary. 

In  cases  in  which  the  tax  is  to  be  computed  under  Adjustmem  of  m- 
this  section,  if  the  tax  as  computed  without  the  «taUmeni  payments 
benefit  of  this  section  is  less  than  50  per  centum  of 
the  net  income  of  the  taxpayer,  the  installments 
shall  in  the  first  instance  be  computed  upon  the  basis 
of  such  tax;  but  if  the  tax  so  computed  is  50  per 
centum  or  more  of  the  net  income,  the  installments 
shall  in  the  first  instance  be  computed  upon  the 
basis  of  a  tax  equal  to  50  per  centum  of  the  net  in- 
come. In  any  case,  the  actual  ratio  when  ascer- 
tained shall  be  used  in  determining  the  correct 
amount  of  the  tax.     If  the  correct  amount  of  the 


Rs^ExuK    Act 


tax  when  determined  exceeds  50  per  centum  of  the 
net  income,  any  excess  of  the  correct  installments 
over  the  amounts  actually  paid  shall  on  notice  and 
demand  be  paid  together  with  interest  at  the  rate 
of  one-half  of  1  per  centum  per  month  on  such  ex- 
cess from  the  time  the  installment  was  due. 
Record  of  exceptional  (c)  The  CommissioncF  shall  keep  a  record  of  all 
"•*•  cases  in  which  the  tax  is  determined  in  the  manner 

prescribed  in  subdivision  (a),  containing  the  name 
and  address  of  each  taxpayer,  the  business  in  which 
engaged,  the  amount  of  invested  capital  and  net  in- 
come shown  by  the  return,  and  the  amount  of  in- 
vested capital  as  determined  under  such  subdinsion. 
The  Commissioner  shall  furnish  a  copy  of  such 
record  and  other  detailed  information  with  respect 
to  such  cases  when  required  by  resolution  of  either 
House  of  Congress,  without  regard  to  the  restric- 
See  page  65  tions  Contained  in  section  257. 


Reorganizations  and 
consolidations  after 
January  1»  1911 


Prewar  income  and 
in?«sl«d.capital 


Where  predecessor 
wu  a  partnership 
or  indiridual 


PART  VI.— REORGANIZATIONS. 

Sec.  880.  That  in  the  case  of  the  reorganization, 
consolidation,  or  change  of  ownership  after  Jan- 
uary 1,  1911,  of  a  trade  or  business  now  carried  on 
by  a  corporation,  the  corporation  shall  for  the  pur- 
poses of  this  title  be  deemed  to  have  been  in  exist- 
ence prior  to  that  date,  and  the  net  income  and  in- 
vested capital  of  such  predecessor  trade  or  business 
for  all  or  any  part  of  the  prewar  period  prior  to 
the  organization  of  the  corporation  now  carrying 
on  such  trade  or  business  shall  be  deemed  to  have 
been  the  net  income  and  invested  capital  of  such 
corporation.  If  such  predecessor  trade  or  business 
was  carried  on  by  a  partnership  or  individual  the 
net  income  for  the  prewar  period  shall,  under  regu- 


W  A  R-P  ROFITI    AND    ExCES  8-P  ROFITsTaX  83 

lations  prescribed  by  the  Commissioner  with  the  ap- 
proval of  the  Secretary,  be  ascertained  and  returned 
as  nearly  as  may  be  upon  the  same  basis  and  in  the 
same  manner  as  provided  for  corporations  in  Title 
II,  including  a  reasonable  deduction  for  salary  or 
compensation  to  each  partner  or  the  individual  for 
personal  services  actually  rendered. 

In  the  case  of  the  organization  as  a  corporation  Option  of  partnership 
before  July  1,  1919,  of  any  trade  or  business  in  «' '«di^<J"«» »« i>f 

./  ,  .  1      •    1  .  1       •  /.      .         taxed  as  corporaUon 

which  capital  is  a  material  income-producing  i  actor 
and  which  was  previously  owned  by  a  partnership 
or  individual,  the  net  income  of  such  trade  or  busi- 
ness from  January  1,  1918,  to  the  date  of  such  re- 
organization may  at  the  option  of  the  individual  or 
partnership  be  taxed  as  the  net  income  of  a  corpo- 
ration is  taxed  under  Titles  II  and  III;  in  which 
event  the  net  income  and  invested  capital  of  such 
trade  or  business  shall  be  computed  as  if  such  cor- 
poration had  been  in  existence  on  and  after  Janu- 
uary  1,  1918,  and  the  undistributed  profits  or  earn- 
ings of  such  trade  or  business  shall  not  be  subject 
to  the  surtax  imposed  in  section  211,  but  amounts  See  page  16 
distributed  on  or  after  January  1,  1918,  from  the 
earnings  of  such  trade  or  business  shall  be  taxed  to 
the  recipients  as  dividends,  and  all  the  provisions 
of  Titles  II  and  III  relating  to  corporations  shall, 
so  far  as  practicable,  apply  to  such  trade  or  busi- 
ness ;  Provided,  That  this  paragraph  shall  not  apply  limitation 
to  any  trade  or  business  the  net  income  of  which  for 
the  taxable  year  1918  was  less  than  20  per  centum 
of  its  invested  capital  for  such  year ;  Provided  fur- 
ther. That  any  taxpayer  who  takes  advantage  of 
this  paragraph  shall  pay  the  tax  imposed  by  section  Capital  stock  tax 
1000  of  this  Act  and  by  the  first  subdivision  of  sec-  See  page  154 
tion  407  of  the  Revenue  Act  of  1916,*  as  if  such  tax- 

*This  subdivision  imposed  a  tax  of  60  cents  on  each  $1,000  of  the 
fair  value  of  the  capital  stock  in  excess  of  $99,000. 


84 


Re  VB  y  UB   Act 


Readjustment  of 
value  of  assets 


Reorganizations  and 
consolidations  after 
March  3, 1917 

Where  control 
remains  with  same 
persons,  no  increase 
in  ralue  of  assets 
permitted. 


Where  previous  owner 
was  not  a  corporation, 
value  of  transferred 
assets  is  cost  of 
acquisition 


payer  had  been  a  corporation  on  and  after  January 
1,  1918,  with  a  capital  stock  having  no  par  value. 

If  any  asset  of  the  trade  or  business  in  existence 
both  during  the  taxable  year  and  any  prewar  year 
is  included  in  the  invested  capital  for  the  taxable 
year  but  is  not  included  in  the  invested  capital  for 
such  prewar  year,  or  is  valued  on  a  different  basis 
in  computing  the  invested  capital  for  the  taxable 
year  and  such  prewar  year,  respectively,  then  under 
rules  and  regulations  to  be  prescribed  by  the  Com- 
missioner with  the  approval  of  the  Secretarj'^  such 
readjustments  shall  be  made  as  are  necessary  to 
place  the  computation  of  the  invested  capital  for 
such  prewar  year  on  the  basis  employed  in  deter- 
mining the  invested  capital  for  the  taxable  year. 

Sec.  331.   In  the  case  of  the  reorganization,  con- 
solidation, or  change  of  ownership  of  a  trade  or  busi- 
ness, or  change  of  ownership  of  property,  after 
March  3, 1917,  if  an  interest  or  control  in  such  trade 
or  business  or  property  of  50  per  centum  or  more 
remains  in  the  same  persons,  or  any  of  them,  then 
no  asset  transferred  or  received  from  the  previous 
owner  shall,  for  the  purpose  of  determining  invested! 
capital,  be  allowed  a  greater  value  than  would  have 
been  allowed  under  this  title  in  computing  the  in- 
vested capital  of  such  previous  owner  if  such  asset 
had  not  been  so  transferred  or  received;  Provided, 
That  if  such  previous  owner  was  not  a  corporation,! 
then  the  value  of  any  asset  so  transferred  or  re- 
ceived shall  be  taken  at  its  cost  of  acquisition  (at  the] 
date  when  acquired  by  such  previous  o^vner)  with 
proper  allowance  for  depreciation,  impairment,  bet- 
terment or  development,  but  no  addition  to  the  origi-! 
nal  cost  shall  be  made  for  any  charge  or  expenditure! 
deducted  as  expense  or  otherwise  on  or  after  March 
1,  1913,  in  computing  the  net  income  of  such  pre-j 
vious  owner  for  purposes  of  taxation. 


W  A  BrP  ROFITB    AlTD     ExCKS  B-P  ROFITSTax  8^ 

PART  VIL— MISCELLANEOUS. 

Sec.  335.  (a)    That  if  a  corporation  (other  than  How  to  compute  tax 

1  •  I  •        \  1  j^  />  for  fiscal  year  begin- 

a  personal  service  corporation)  makes  return  for  a  ning in  1917 and 
fiscal  year  beginning  in  1917  and  ending  in  1918,  ending  in  1918 
the  tax  for  the  first  taxable  year  under  this  title 
shall  be  the  sum  of:  (1)  the  same  proportion  of  a 
tax  for  the  entire  period  computed  under  Title  II 
of  the  Revenue  Act  of  1917*  which  the  portion  of 
such  period  falling  within  the  calendar  year  1917 
is  of  the  entire  period,  and  (2)  the  same  propor- 
tion of  a  tax  for  the  entire  period  computed  under 
this  title  at  the  rates  specified  in  subdivision  (a)  of 
section  301  which  the  portion  of  such  period  falling 
within  the  calendar  year  1918  is  of  the  entire  period. 

Any  amount  heretofore  or  hereafter  paid  on  ac-  Credit  for  tax  paid 
count  of  the  tax  imposed  for  such  fiscal  year  by  under  Revenue 
Title  II  of  the  Revenue  Act  of  1917*  shaU  be  A^»*^^^»^^ 
credited  toward  the  payment  of  the  tax  imposed  for 
such  fiscal  year  by  this  title,  and  if  the  amount  so 
paid  exceeds  the  amount  of  the  tax  imposed  by  this 
title,  the  excess  shall  be  credited  or  refunded  to  the 
corporation  in  accordance  with  the  provisions  of 
section  252.  ^' ''''  '^ 

(b)  If  a  corporation  makes  return  for  a  fiscal  year  Tax  for  fiscal  year 
beginning  in  1918  and  ending  in  1919,  the  tax  for  beginning  in  1918  and 
such  fiscal  year  under  this  title  shaU  be  the  sum  of;  '"**^"«^"  ^^^^ 
( 1 )  the  same  proportion  of  a  tax  for  the  entire  pe- 
riod computed  under  subdivision  (a)  of  section  301 
which  the  portion  of  such  period  falhng  within  the 
calendar  year  1918  is  of  the  entire  period,  and  (2) 
the  same  proportion  of  a  tax  for  the  entire  period 
computed  under  subdivision  (b)  or  (c)  of  section 
301  which  the  portion  of  such  period  falhng  within 
the  calendar  year  1919  is  of  the  entire  period. 

*This  title  imposed  a  war  excess-profits  tax  at  rates  of  20%,  26%, 
36%,  46%,  and  60%. 


Rbtxvvb   Act 


Tax  on  parfnertldps 
and  personal  semce 
corporations  limited 
^  calendar  year  1917 


Returns  and 
payment  of  tax 


See  pages  42,  57,  62 


Limit  on  tax  on 
profits  resulting  from 
prospecting 


(c)  If  a  partnership  or  a  personal  service  corpo- 
ration makes  return  for  a  fiscal  year  beginning  in 
1917  and  ending  in  1918,  it  shall  pay  the  same  pro- 
portion of  a  tax  for  the  entire  period  computed  un- 
der Title  II  of  the  Revenue  Act  of  1917*  which  the 
portion  of  such  period  falling  within  the  calendar 
year  1917  is  of  the  entire  period. 

Any  tax  paid  by  a  partnership  or  personal  service 
corporation  for  any  period  begiiming  on  or  after 
January  1,  1918,  shall  be  immediately  refunded  to 
the  partnership  or  corporation  as  a  tax  erroneously 
or  illegally  collected. 

Sec.  386.  That  every  corporation,  not  exempt 
under  section  304,  shall  make  a  return  for  the  pur- 
poses of  this  title.  Such  returns  shall  be  made,  and 
the  taxes  imposed  by  this  title  shall  be  paid,  at  the 
same  tunes  and  places,  in  the  same  manner,  t  and 
subject  to  the  same  conditions,  as  is  provided  in  the 
case  of  returns  and  payment  of  income  tax  by  corpo- 
rations for  the  purposes  of  Title  II,  and  all  the  pro- 
visions of  that  title  not  inapplicable,  including 
penalties,  are  hereby  made  applicable  to  tlie  taxes 
imposed  by  this  title. 

Sec.  337.  That  in  the  case  of  a  bona  fide  sale  of 
mines,  oil  or  gas  wells,  or  any  interest  therein,  where] 
the  principal  value  of  the  property  has  been  demon-' 
strated  by  prospecting  or  exploration  and  discovery 
work  done  by  the  taxpayer,  the  portion  of  the  tax 
imposed  by  this  title  attributable  to  such  sale  shall 
not  exceed  20  per  centum  of  the  selling  price  of! 
such  property  or  interest. 


'This  title  imposed  a  war  excess-profits  tax  at  rates  of  90%,  25%, 
S6%,  45%,  and  60%. 

fFor  use  of  uncertified  checks  and  U.  S.  certificates  of  Indebted-j 
ness  to  pay  taxes,  see  section  1314. 


TITLE  IV. 
Estate  Tax 

Sec.  400.  That  when  used  in  this  title —  Definitions 

The  term  "executor"  means  the  executor  or  ad-  Executor 
ministrator  of  the  decedent,  or,  if  there  is  no  execu- 
tor or  administrator,  any  person  who  takes  posses- 
sion of  any  property  of  the  decedent;  and 

The  term  "collector"  means  the  collector  of  in-  collector 
ternal  revenue  of  the  district  in  which  was  the  domi- 
cile of  the  decedent  at  the  time  of  his  death,  or,  if 
there  was  no  such  domicile  in  the  United  States, 
then  the  collector  of  the  district  in  which  is  situated 
the  part  of  the  gross  estate  of  the  decedent  in  the 
United  States,  or,  if  such  part  of  the  gross  estate  is 
situated  in  more  than  one  district,  then  the  collector 
of  internal  revenue  of  such  district  as  may  be  desig- 
nated by  the  Commissioner. 

Sec.  401.    That  (in  lieu  of  the  tax  imposed  by  Tax  on  transfer  of 
Title  II  of  the  Revenue  Act  of  1916,  as  amended,  net  estate 
and  in  lieu  of  the  tax  imposed  by  Title  IX  of  the 
Revenue  Act  of  1917)  a  tax  equal  to  the  sum  of  the 
following  percentages  of  the  value  of  the  net  estate 
(determined  as  provided  in  section  403)  is  hereby 
imposed  upon  the  transfer  of  the  net  estate  of  every 
decedent   dying   after   the   passage   of   this    Act, 
whether  a  resident  or  nonresident  of  the  United  Tax  rates 
States: 

1  per  centum  of  the  amount  of  the  net  estate  not 
in  excess  of  $50,000 ; 

2  per  centum  of  the  amount  by  which  the  net 

87 


1 


Rbtb vuK   Act 


Tax  ralM 

continued 


estate  exceeds  $50,000  and  does  not  exceed  $150,- 
000; 

8  per  centum  of  the  amount  by  which  the  net 
estate  exceeds  $150,000  and  does  not  exceed  $250,- 
000; 

4  per  centum  of  the  amount  by  which  the  net 
estate  exceeds  $250,000  and  does  not  exceed  $450,- 
000; 

6  per  centum  of  the  amount  by  which  the  net 
estate  exceeds  $450,000  and  does  not  exceed  $750,- 
000; 

8  per  centum  of  the  amount  by  which  the  net 
eistate  exceeds  $750,000  and  does  not  exceed  $1,- 
000,000 ; 

10  per  centum  of  the  amount  by  which  the  net 
estate  exceeds  $1,000,000  and  does  not  exceed  $1,- 
500,000 ; 

12  per  centum  of  the  amount  by  which  the  net 
estate  exceeds  $1,500,000  and  does  not  exceed  $2,- 
000,000 ; 

14  per  centum  of  the  amount  by  which  the  net 
estate  exceeds  $2,000,000  and  does  not  exceed  $8,- 
000,000; 

16  per  centum  of  the  amount  by  which  the  net 
estate  exceeds  $8,000,000  and  does  not  exceed  $4,- 
000,000; 

18  per  centum  of  the  amount  by  which  the  net 
estate  exceeds  $4,000,000  and  does  not  exceed  $5,- 
000,000; 

20  per  centum  of  the  amount  by  which  the  net 
estate  exceeds  $5,000,000  and  does  not  exceed  $8,- 
000,000 ; 

22  per  centum  of  the  amount  by  which  the  net 
estate  exceeds  $8,000,000  and  does  not  exceed  $10,- 
000,000 ;  and 

25  per  centum  of  the  amount  by  which  the  net 
estate  exceeds  $10,000,000. 


Estate   Tax  89 

The  taxes  imposed  by  this  title  or  by  Title  II  of  Exemption  of  estates 
the  Revenue  Act  of  1916  (as  amended  by  the  Act  ^y7/"*/„^"f,^ 
entitled  "An  Act  to  provide  increased  revenue  to  rm'^dLnTpresent 
defray  the  expenses  of  the  increased  appropriations  war 
for  the  army  and  navy  and  the  extensions,  of  for- 
tifications,   and    for    other    purposes,"    approved 
March  3,  1917)   or  by  Title  IX  of  the  Revenue 
Act  of  1917,  shall  not  apply  to  the  transfer  of  the 
net  estate  of  any  decedent  who  has  died  or  may  die 
while  serving  in  the  military  or  naval  forces  of  the 
United  States  in  the  present  war  or  from  injuries 
received  or  disease  contracted  while  in  such  service, 
and  any  such  tax  collected  upon  such  transfer  shall 
be  refunded  to  the  executor. 

Sec.  402.   That  the  value  of  the  gross  estate  of  Value  of  gross  estate 
the  decedent  shall  be  determined  by  including  the  ""^"*^®** 
value  at  the  time  of  his  death  of  all  property,  real 
or  personal,  tangible  or  intangible,  wherever  situ- 
ated— 

(a)  To  the  extent  of  the  interest  therein  of  the  Property  in  charge  of 
decedent  at  the  time  of  his  death  which  after  his  *"'"*•'' 
death  is  subject  to  the  payment  of  the  charges 

against  his  estate  and  the  expenses  of  its  adminis- 
tration and  is  subject  to  distribution  as  part  of  his 
estate; 

(b)  To  the  extent  of  any  interest  therein  of  the  interest  of  surviving 
surviving  spouse,  existing  at  the  time  of  the  dece-  ***""" 

dent's  death  as  dower,  courtesy,  or  by  virtue  of  a 
statute  creating  an  estate  in  lieu  of  dower  or 
courtesy ; 

(c)  To  the  extent  of  any  interest  therein  of  which  Transfers  in  con- 
the  decedent  has  at  any  time  made  a  transfer,  or   ®"'**'®"" 
with  respect  to  which  he  has  at  any  time  created  a 

trust,  in  contemplation  of  or  intended  to  take  effect 
in  possession  or  enjoyment  at  or  after  his  death 
(whether  such  transfer  or  trust  is  made  or  created 
before  or  after  the  passage  of  this  act),  except  in 


90 


RsTsvuB   Act 


Interestt  held 
jointly  or  in  entirety 


Property  patung  by 
will  or  deed 


Insurance 


Net  estate  of 
resident 

Deductions: 


Expenses  and  losses 


case  of  a  bona  fide  sale  for  a  fair  consideration  in 
money  or  money's  worth.  Any  transfer  of  a  mate- 
rial part  of  his  property  in  the  nature  of  a  final  dis- 
position or  distribution  thereof,  made  by  the  dece- 
dent within  two  years  prior  to  his  death  without  such 
a  consideration,  shall,  unless  shown  to  the  contrary, 
be  deemed  to  have  been  made  in  contemplation  of 
death  within  the  meaning  of  this  title; 

(d)  To  the  extent  of  the  interest  therein  held  joint- 
ly or  as  tenants  in  the  entirety  by  the  decedent  and 
any  other  person,  or  deposited  in  banks  or  other 
institutions  in  their  joint  names  and  payable  to 
either  or  the  survivor,  except  such  part  thereof  as 
may  be  shown  to  have  originally  belonged  to  such 
other  person  and  never  to  have  belonged  to  the  de- 
cedent; 

(e)  To  the  extent  of  any  property  pasting  under 
a  general  power  of  appointment  exercised  by  the 
decedent (1)  by  will,  or  (2)  by  deed  executed  in 
contemplation  of,  or  intended  to  take  effect  in  pos- 
session or  enjoyment  at  or  after,  his  death,  except 
in  case  of  a  bona  fide  sale  for  a  fair  consideration  in 
money  or  money's  worth ;  and 

(f)  To  the  extent  of  the  amount  receivable  by 
the  executor  as  insurance  under  policies  taken  out 
by  the  decedent  upon  his  onu  life;  and  to  the  extent 
of  the  excess  over  $40,000  of  the  amount  receivable 
by  all  other  beneficiaries  as  insurance  under  policies 
taken  out  by  the  decedent  upon  his  own  life. 

Sec.  403.  That  for  the  purpose  of  the  tax  the 
value  of  the  net  estate  shall  be  determined — 

(a)  In  the  case  of  a  resident,  by  deducting  from 
the  value  of  the  gross  estate — 

( 1 )  Such  amounts  for  funeral  expenses,  adminis- 
tration expenses,  claims  against  the  estate,  unpaid 
mortgages,  losses  incurred  during  the  settlement 


Estate   Tax  91 

of  the  estate  arising  from  fires,  storms,  shipwreck, 
or  other  casualty,  or  from  theft,  when  such  losses 
are  not  compensated  for  by  insurance  or  otherwise, 
and  such  amounts  reasonably  required  and  actually 
expended  for  the  support  during  the  settlement  of 
the  estate  of  those  dependent  upon  the  decedent, 
as  are  allowed  by  the  laws  of  the  jurisdiction, 
whether  within  or  without  the  United  States,  under 
which  the  estate  is  being  administered,  but  not  in- 
cluding any  income  taxes  upon  income  received 
after  the  death  of  the  decedent,  or  any  estate,  suc- 
cession, legacy,  or  inheritance  taxes ; 

(2)  An  amount  equal  to  the  value  at  the  time  of  Property  on  which 
the  decedent's  death  of  any  property,  real,  personal,  ^^be1n*'^d  ^  Mn 
or  mixed,  which  can  be  identified  as  having  been  Hve  years 
received  by  the  decedent  as  a  share  in  the  estate  of 
any  person  who  died  within  five  years  prior  to  the 
death  of  the  decedent,  or  which  can  be  identified 
as  having  been  acquired  by  the  decedent  in  exchange 
for  property  so  received,  if  an  estate  tax  under  the 
Revenue  Act  of  1917  or  under  this  Act  was  col- 
lected from  such  estate,  and  if  such  property  is  in- 
cluded in  the  decedent's  gross  estate ; 

(8)  The  amount  of  all  bequests,  legacies,  devises.  Bequests  for  public, 
or  gifts,  to  or  for  the  use  of  the  United  States,  any  ^j^^^^^^^^^^^  ,3, 
state,  territory,  any  political  subdivision  thereof,  or 
the  District  of  Columbia,  for  exclusively  public 
purposes,  or  to  or  for  the  use  of  any  corporation 
organized  and  operated  exclusively  for  rehgious, 
charitable,  scientific,  literary,  or  educational  pur- 
poses, including  the  encouragement  of  art  and  the 
prevention  of  cruelty  to  children  or  animals,  no 
part  of  the  net  earnings  of  which  inures  to  the  ben- 
efit of  any  private  stockholder  or  individual,  or  to 
a  trustee  or  trustees  exclusively  for  such  religious, 
charitable,  scientific,  literary,  or  educational  pur- 
poses. This  deduction  shall  be  made  in  case  of  the 


93 


Rbfs  ir  UB    Act 


Eiemption 

Net  estate  of  non- 
resident 

Deductions: 

Proportion  of 
•xpenses  and  losses 


Property  on  which 
Federal  estate  tai 
has  been  paid  within 
five  J9MI% 


Bequests  for  public, 
charitable  or  educa- 
tional purposes 


estates  of  all  decedents  who  have  died  since  De- 
cember 81,  1917;  and 

(4)  An  exemption  of  $50,000; 

(b)  In  the  case  of  a  nonresident,  by  deducting 
from  the  value  of  that  part  of  his  gross  estate  which 
at  the  time*  of  his  death  is  situated  in  the  United 
States — 

(1)  That  proportion  of  the  deductions  specified 
in  paragraph  (1)  of  subdivision  (a)  of  this  section 
which  the  value  of  such  part  bears  to  the  value  of 
his  entire  gross  estate,  wherever  situated,  but  in  no 
case  shall  the  amount  so  deducted  exceed  10  per 
centtmfi  of  the  value  of  that  part  of  his  gross  estate 
which  at  the  time  of  his  death  is  situated  in  the 
United  States; 

(2)  An  amount  equal  to  the  value  at  the  time  of 
the  decedent's  death  of  any  property,  real,  personal, 
or  mixed,  which  can  be  identified  as  having  been 
received  by  the  decedent  as  a  share  in  the  estate  of 
any  person  who  died  within  five  years  prior  to  the 
death  of  the  decedent,  or  which  can  be  identified 
as  having  been  acquired  by  the  decedent  in  ex- 
change for  property  so  received,  if  an  estate  tax 
under  the  Revenue  Act  of  1917  or  under  this  Act 
was  collected  from  such  estate,  and  if  such  property 
is  included  in  that  part  of  the  decedent's  gross  es- 
tate which  at  the  time  of  his  death  is  situated  in  the 
United  States ;  and 

(8)  The  amount  of  all  bequests,  legacies,  devises, 
or  giftsi,  to  or  for  the  use  of  the  United  States,  any 
state,  territory,  any  political  subdivision  thereof  or 
the  District  of  Columbia,  for  exclusively  public 
purposes,  or  to  or  for  the  use  of  any  domestic 
corporation  organized  and  operated  exclusively  for, 
religious,  charitable,  scientific,  literary,  or  educa- 
tional purposes,  including  the  encouragement  of 
art  and  the  prevention  of  cruelty  to  children  or 


Estate   Tax  93 

animals,  no  part  of  the  net  earnings  of  which  inures 
to  the  benefit  of  any  private  stockholder  or  individ- 
ual, or  to  a  trustee  or  trustees  exclusively  for  such 
reUgious,  charitable,  scientific,  literary,  or  educa- 
tional purposes  within  the  United  States.  This 
deduction  shall  be  made  in  case  of  the  estates  of  all 
decedents  who  have  died  since  December  31,  1917; 
and 

No  deduction  shall  be  allowed  in  the  case  of  a  Return  must  be  filed 
nonresident  unless  the  executor  includes  in  the  re-  to  obtain  deductions 
turn  required  to  be  filed  under  section  404  the  value 
at  the  time  of  his  death  of  that  part  of  the  gross 
estate  of  the  nonresident  not  situated  in  the  United 
States. 

For  the  purpose  of  this  title  stock  in  a  domestic  Property  within  U.S. 
corporation  owned  and  held  by  a  nonresident  de-  construed 
cedent,  and  the  amount  receivable  as  insurance 
upon  the  life  of  a  nonresident  decedent  where  the 
insurer  is  a  domestic  corporation,  shall  be  deemed 
property  within  the  United  States,  and  any  prop- 
erty of  which  the  decedent  has  made  a  transfer  or 
with  respect  to  which  he  has  created  a  trust,  within 
the  meaning  of  subdivision  (c)  of  section  402,  shall 
be  deemed  to  be  situated  in  the  United  States,  if  so 
situated  either  at  the  time  of  the  transfer  or  the 
creation  of  the  trust,  or  at  the  time  of  the  decedent's 
death. 

In  the  case  of  any  estate  in  respect  to  which  the  Redetermination  of 
tax  under  existing  law  has  been  paid,  if  necessary  to  *»% 
allow  the  benefit  of  the  deduction  under  paragraph 
(3)  of  subdivision  (a)  or  (b)  the  tax  shall  be  rede- 
termined and  any  excess  of  tax  paid  shall  be  re- 
funded to  the  executor. 

Sec.  404.  That  the  executor,  within  sixty  days  Executor's  notice 
after  qualifying  as  such,  or  after  coming  into  pos- 
session of  any  property  of  the  decedent,  whichever 
event  first  occurs,  shall  give  written  notice  thereof 


94 


RsvBKUs    Act 


Relnrn 


Where  return  must 
be  made 


^Metsmenl 


Return  by  collector 


When  tax  is  dot 


to  the  collector.  The  executor  shall  also,  at  such 
times  and  in  such  manner  as  may  be  required  by 
regulations  made  pursuant  to  law,  file  with  the  col- 
lector a  return  under  oath  in  duplicate,  setting  forth 
(a)  the  value  of  the  gross  estate  of  the  decedent  at 
the  time  of  his  death,  or,  in  case  of  a  nonresident, 
of  that  part  of  his  gross  estate  situated  in  the  United 
States;  (b)  the  deductions  allowed  under  section 
403;  (c)  the  value  of  the  net  estate  of  the  decedent 
as  defined  in  section  403;  and  (d)  the  tax  paid  or 
payable  thereon;  or  such  part  of  such  information 
as  may  at  the  time  be  ascertainable  and  such  sup- 
plemental data  as  may  be  necessary  to  establish 
the  correct  tax. 

Return  shall  be  made  in  all  cases  where  the  gross 
estate  at  the  death  of  the  decedent  exceeds  $50,000, 
and  in  the  case  of  the  estate  of  every  nonresident 
any  part  of  whose  gross  estate  is  situated  in  the 
United  States.  If  the  executor  is  unable  to  make 
a  complete  return  as  to  any  part  of  the  gross  estate 
of  the  decedent,  he  shall  include  in  his  return  a  de- 
scription of  such  part  and  the  name  of  every  person 
holding  a  legal  or  beneficial  interest  therein,  and 
upon  notice  from  the  collector  such  person  shall 
in  like  manner  make  a  return  as  to  such  part  of  the 
gross  estate.  The  Commissioner  shall  make  all  as- 
sessments of  the  tax  under  the  authority  of  existing 
administrative  special  and  general  provisions  of  law 
relating  to  the  assessment  and  collection  of  taxes. 

Sec.  405.  That  if  no  administration  is  granted 
upon  the  estate  of  a  decedent,  or  if  no  return  is  filed 
as  provided  in  section  404,  or  if  a  return  contains 
a  false  or  incorrect  statement  of  a  material  fact,  the 
collector  or  deputy  collector  shall  make  a  return 
and  the  Commissioner  shall  assess  the  tax  thereon. 

Sec.  406.  That  the  tax  shall  be  due  one  year  after 
the  decedent's  death;  but  in  anv  case  where  the 


EstateTax  M 

Commissioner  finds  that  payment  of  the  tax  within 
one  year  after  the  decedent's  death  would  impose 
undue  hardship  upon  the  estate,  he  may  grant  an 
extension  of  time  for  the  payment  of  the  tax  for  a 
period  not  to  exceed  three  years  from  the  due  date. 
If  the  tax  is  not  paid  within  one  year  and  180  days 
after  the  decedent's  death,  interest  at  the  rate  of  6 
per  centum  per  annum  from  the  expiration  of  one 
year  after  the  decedent's  death  shall  be  added  as 
part  of  the  tax. 

Sec.  407.  That  the  executor  shall  pay  the  tax  to  Payment 
the  collector  or  deputy  collector.  If  the  amount  of 
the  tax  can  not  be  determined,  the  payment  of  a 
sum  of  money  sufficient,  in  the  opinion  of  the  col- 
lector, to  discharge  the  tax  shall  be  deemed  payment 
in  full  of  the  tax,  except  as  in  this  section  otherwise  Refund  of  over- 
provided.  If  the  amount  so  paid  exceeds  the  payments 
amount  of  the  tax  as  finally  determined,  the  Com- 
missioner shall  refund  such  excess  to  the  executor. 
If  the  amount  of  the  tax  as  finally  determined  ex-  Underpayments 
ceeds  the  amount  so  paid,  the  collector  shall  notify 
the  executor  of  the  amount  of  such  excess  and  de- 
mand payment  thereof.  If  such  excess  part  of  the 
tax  is  not  paid  within  thirty  days  after  such  noti- 
fication, interest  shall  be  added  thereto  at  the  rate 
of  10  per  centum  per  annum  from  the  expiration 
of  such  thirty  days'  period  until  paid,  and  the 
amount  of  such  excess  shall  be  a  lien  upon  the  en- 
tire gross  estate,  except  such  part  thereof  as  may 
have  been  sold  to  a  bona  fide  purchaser  for  a  fair 
consideration  in  money  or  money's  worth. 

The  collector  shall  grant  to  the  person  paying  Receipts 
the  tax  duplicate  receipts,  either  of  which  shall  be 
sufficient  evidence  of  such  payment,  and  shall  en- 
title the  executor  to  be  credited  and  allowed  the 
amount  thereof  by  any  court  having  jurisdiction  to 
audit  or  settle  his  accounts. 


W  RevbkubAct 

Default  in  payment  Sec.  408.  That  if  the  tax  herein  imposed  is  not 

"'*"  paid  within  180  days  after  it  is  due,  the  collector 

shall,  unless  there  is  reasonable  cause  for  further 
delay,  proceed  to  collect  the  tax  under  the  provi- 
sions of  general  law,  or  commence  appropriate 
proceeding*  in  any  court  of  the  United  States,  in 
the  name  of  the  United  States,  to  subject  the  prop- 
erty of  the  decedent  to  be  sold  under  the  judgment 
or  decree  of  the  court.  From  the  proceeds  of  such 
sale  the  amount  of  the  tax,  together  with  the  costs 
and  expenses  of  every  description  to  be  allowed  by 
the  court,  shall  be  first  paid,  and  the  balance  shall 
be  deposited  according  to  the  order  of  the  court,  to 
be  paid  imder  its  direction  to  the  person  entitled 
thereto. 

Reimburtement  where         Jf  ^J^g  ^^^  qj,  ^j^y  p^j.^  thereof  is  paid  by,  Or  Col- 

ihan'executor  **    ^      Icctcd  out  of  that  part  of  thc  cstatc  passing  to  or  in 

the  possession  of,  any  person  other  than  the  exec- 
utor in  his  capacity  as  such,  such  person  shall  be 
entitled  to  reimbursement  out  of  any  part  of  the 
estate  still  undistributed  or  by  a  just  and  equitable 
contribution  by  the  persons  whose  interest  in  the 
estate  of  the  decedent  would  have  been  reduced  if 
the  tax  had  been  paid  before  the  distribution  of  the 
estate  or  whose  interest  is  subject  to  equal  or  prior 
liability  for  the  payment  of  taxes,  debts,  or  other 
charges  against  the  estate,  it  being  the  purpose  and 
intent  of  this  title  that  so  far  as  is  practicable  and 
Tax  to  be  paid  before  unlcss  otherwisc  directed  by  the  will  of  the  decedent 
diatribuiion  the  tax  shall  be  paid  out  of  the  estate  before  its  dis- 

tribution. If  any  part  of  the  gross  estate  consists 
of  proceeds  of  policies  of  insurance  upon  the  life 
of  the  decedent  receivable  by  a  beneficiary  other 
than  the  executor,  the  executor  shall  be  entitled  to 
recover  from  such  beneficiar\^  such  portion  of  the 
total  tax  paid  as  the  proceeds,  in  excess  of  $40,000, 
of  such  policies  bear  to  the  net  estate.    If  there  is 


EiTATE   Tax  97 

more  than  one  such  beneficiary  the  executor  shall 
be  entitled  to  recover  from  such  beneficiaries  in  the 
same  ratio. 

Sec.  409.  That  unless  the  tax  is  sooner  paid  in  Tax  Uen  for  lo  yem 
full,  it  shall  be  a  lien  for  ten  years  upon  the  gross 
estate  of  the  decedent,  except  that  such  part  of  the 
gross  estate  as  is  used  for  the  payment  of  charges 
against  the  estate  and  expenses  of  its  administra- 
tion, allowed  by  any  court  having  jurisdiction  there- 
of, shall  be  divested  of  such  lien.  If  the  Commis- 
sioner is  satisfied  that  the  tax  liability  of  an  estate 
has  been  fully  discharged  or  provided  for,  he  may, 
under  regulations  prescribed  by  him  with  the  ap- 
proval of  the  Secretary,  issue  his  certificate  releas- 
ing any  or  all  property  of  such  estate  from  the  lien 
herein  imposed. 

If  (a)  the  decedent  makes  a  transfer  of,  or  ere-  Transfers  or  tnitts 

,  ,         ,        . ,  1  ,    .  ,       .  made  in  contemplation 

ates  a  trust  with  respect  to,  any  property  m  con-  ^,f  jg^ji, 
templation  of  or  intended  to  take  eflFect  in  posses- 
sion or  enjoyment  at  or  after  his  death  (except  in 
the  case  of  a  bona  fide  sale  for  a  fair  consideration 
in  money  or  money's  worth)  or  (b)  if  insurance  '"««'««" 
passes  under  a  contract  executed  by  the  decedent 
in  favor  of  a  specific  beneficiary,  and  if  in  either 
case  the  tax  in  respect  thereto  is  not  paid  when  due.  Transferee  liable 
then  the  transferee,  trustee,  or  beneficiary  shall  be 
personally  liable  for  such  tax,  and  such  property, 
to  the  extent  of  the  decedent's  interest  therein  at 
the  time  of  such  transfer,  or  to  the  extent  of  such 
beneficiary's  interest  under  such  contract  of  insur- 
ance, shall  be  subject  to  a  like  lien  equal  to  the 
amount  of  such  tax.  Any  part  of  such  property 
sold  by  such  transferee  or  trustee  to  a  bona  fide 
purchaser  for  a  fair  consideration  in  money  or 
money's  worth  shall  be  divested  of  the  lien  and  a 
like  lien  shall  then  attach  to  all  the  property  of  such 
transferee  or  trustee,  except  any  part  sold  to  a 


Rs  VB  s  UB   Act 


in 


Penalty  for  false 
ttatemenU 


Penalty  for  failure  !• 
file  notice  or  return, 
or  to  furnish  in- 
formation 


bona  fide  purchaser  for  a   fair  consideration 
money  or  money's  worth. 

Sec.  410.  That  whoever  knowingly  makes  any 
false  statement  in  any  notice  or  return  required  to 
be  filed  under  this  title  shall  be  liable  to  a  penalty 
of  not  exceeding  $5,000,  or  imprisonment  not  ex- 
ceeding one  year,  or  both. 

Whoever  fails  to  comply  with  any  duty  imposed 
upon  him  by  section  404,  or,  having  in  his  possession 
or  control  any  record,  file,  or  paper,  containing  or 
supposed  to  contain  any  information  concerning  the 
estate  of  the  decedent,  or,  having  in  his  possession 
or  control  any  property  comprised  in  the  gross 
estate  of  the  decedent,  fails  to  exhibit  the  same  upon 
request  to  the  Commissioner  or  any  collector  or  law 
officer  of  the  United  States,  or  his  duly  authorized 
deputy  or  agent,  who  desires  to  examine  the  same 
in  the  performance  of  his  duties  under  this  title, 
shall  be  liable  to  a  penalty  of  not  exceeding  $500, 
to  be  recovered,  with  costs  of  suit,  in  a  civil  action 
in  the  name  of  the  United  States. 


TITLE  V. 

Tax    on     Transportation    and     Other 
Facilities,  and  on  Insurance 

Transportation  and  Other  Facilities. 

Sec.  500.  That  from  and  after  April  1,  1919,  Tax  on  transportation 
there  shall  be  levied,  assessed,  collected,  and  paid,  '^^t®  ^'^"ti^e 
in  lieu  of  the  taxes  imposed  by  section  500  of  the 
Revenue  Act  of  1917 — 

(a)  A  tax  equivalent  to  3  per  centum  of  the  Taxonfreight, 
amount  paid  for  the  transportation  on  or  after  such  ^  p®""  ""* 
date,  by  rail  or  water  or  by  any  form  of  mechanical 

motor  power  when  in  competition  with  carriers  by 
rail  or  water,  of  property  by  freight  transported 
from  one  point  in  the  United  States  to  another;  and 
a  like  tax  on  the  amount  paid  for  such  transporta- 
tion within  the  United  States  of  property  trans- 
ported from  a  point  without  the  United  States  to 
a  point  within  the  United  States ; 

(b)  A  tax  of  1  cent  for  each  20  cents  or  frao-  Tax  on  express, 
tion  thereof  of  the  amount  paid  to  any  person  for  ic  for  each  20c 
the  transportation  on  or  after  such  date,  by  rail  or  ^  *^^* 
water  or  by  any  form  of  mechanical  motor  power 

when  in  competition  with  express  by  rail  or  water, 
of  any  package,  parcel,  or  shipment,  by  express, 
transported  from  one  point  in  the  United  States 
to  another;  and  a  like  tax  on  the  amount  paid  for 
such  transportation  within  the  United  States  of 
property  transported  from  a  point  without  the 
United  States  to  a  point  within  the  United  States; 

(c)  A  tax  equivalent  to  8  per  centimi  of  the  Tax  on  passenger 
amount  paid  for  the  transportation  on  or  after  ««'"^*=«'  ^  p®»"  ""* 

99 


100 


Rktsvub   Act 


Exceptions 


LimiUtion  of  lax 
on  carrier*  by  water 
competing  with 
foreign  lines 


Tax  on  Pullman 
accommodations, 
8  per  cent 


Tax  on  pipe  line 
transportation, 
8  per  cent 

Tax  on  telegraph, 
telephone,  cable  and 
radio  service 


such  date  of  persons  by  rail  or  water,  or  by  any 
form  of  mechanical  motor  power  on  a  regular  es- 
tablished line  when  in  competition  with  carriers  by 
rail  or  water,  from  one  point  in  the  United  States 
to  another  or  to  any  point  in  Canada  or  Mexico, 
where  the  ticket  or  order  therefor  is  sold  or  issued 
in  the  United  States,  not  including  the  amount  paid 
for  commutation  or  season  tickets  for  trips  less  than 
thirty  miles,  or  for  transportation  the  fare  for  which 
does  not  exceed  42  cents;  Provided,  That  where  such 
water  transportation  lines  are  in  competition  be- , 
tween  American  ports  with  foreign  water  transpor- 
tation lines  from  adjacent  foreign  ports,  the  tax  im- 
posed under  this  subdivision  on  amounts  paid  for 
water  transportation  between  American  ports  shall 
not  exceed  the  amount  of  the  transportation  tax  to 
which  such  foreign  water  transportation  lines  are 
subjected  by  their  Grovernment  corresponding  to 
this  tax; 

(d)  A  tax  equivalent  to  8  per  centum  of  the 
amount  paid  for  seats,  berths,  and  staterooms  in 
parlor  cars,  sleeping  cars,  or  on  vessels,  used  on  or 
after  such  date  in  connection  with  transportation 
upon  wliich  tax  is  imposed  by  subdivision  (c) ; 

(e)  A  tax  equivalent  to  8  per  centum  of  the 
amount  paid  for  the  transportation  on  or  after 
such  date  of  oil  by  pipe  line; 

(f)  In  the  case  of  each  telegraph,  telephone,  ca- 
ble, or  radio,  dispatch,  message,  or  conversation, 
which  originates  on  or  after  such  date  within  the 
United  States,  and  for  the  transmission  of  which 
the  charge  is  more  than  14  cents  and  not  more  than 
50  cents,  a  tax  of  5  cents;  and  if  the  charge  is  more 
than  50  cents,  a  tax  of  10  cents;  Provided,  That 
only  one  payment  of  such  tax  shall  be  required, 
notwithstanding  the  lines  or  stations  of  one  or  more 


■»         »     O    ',»       t 

1 »     1  ■',   , 


»   1  >> 


Tbanspobtatiox   and   I  nsub  a's^ce*     >      >>^'    '^.'i^:i   '*         101 


» >  '»  » » 


persons  are  used  for  the  transmission  of  such  dis- 
patch, message,  or  conversation;  and 

(g)  A  tax  equivalent  to  10  per  centum  of  the  Tax  on  leased  wires, 
amount  paid  after  such  date  to  any  telegraph  or  ^^p®'^®"*- 
telephone  company  for  any  leased  wire  or  talking 
circuit  special  service  furnished  after  such  date. 
This  subdivision  shall  not  apply  to  the  amount  paid  Exceptions: 
for  so  much  of  such  service  as  is  utilized  ( 1 )  in  the  (i)  News  wires 
collection  and  dissemination  of  news  through  the 
public  press,  or  (2)  in  the  conduct,  by  a  common 

,1  I  ■11  /»«i(2)  Carrier's  own 

carrier  or  telegraph  or  telephone  company,  of  its  |,u,iness 
business  as  such. 

(h)  No  tax  shall  be  imposed  under  this  section  No  tax  on  services 
upon  any  payment  received  for  services  rendered  to  *®  ^^^^^^^  ^^  **«'« 
the  United  States  or  to  any  State  or  Territory  or  ^®^®'""*®"  * 
the  District  of  Columbia.   The  right  to  exemption 
under  this  subdivision  shall  be  evidenced  in  such 
manner  as  the  Commissioner,  with  the  approval  of 
the  Secretary,  may  by  regulation  prescribe. 

Sec.  501.  (a)  That  the  taxes  imposed  by  section  Tax  to  be  paid  by 
500  shall  be  paid  by  the  person  paying  for  the  ser-  p®""*®"*  *^^^^ 
vices  or  facilities  rendered. 

(b)   If  a  mileage  book  used  for  transportation  Transportation 
or  accommodation  was  purchased  before  November  purchased  prior  to 
1,  1917,  or  if  cash  fare  is  paid,  the  tax  imposed  by  ^^"'^"**"' ''  ^^^^ 
section  500  shall  be  collected  from  the  person  pre- 
senting the  mileage  book,  or  paying  the  cash  fare,  by  Cash  fare 
the  conductor  or  other  agent,  when  presented  for 
such  transportation   or   accommodation,   and   the 
amount  so  collected  shall  be  paid  to  the  United 
States  in  such  manner  and  at  such  times  as  the  Com- 
missioner, with  the  approval  of  the  Secretary,  may 
prescribe;  if  a  ticket  (other  than  a  mileage  book) 
was  bought  and  partially  used  before  November  1, 
1917,  it  shall  not  be  taxed,  but  if  bought  but  not  so 
used  before  section  500  takes  effect,  it  shall  not  be 
valid  for  passage  until  the  tax  has  been  paid  and 


192 


Rbtb VUB   Act 


Taxes  apply  to 
specified  terrices, 
whether  or  not  agent 
is  a  common  carrier 


Tax  where  carrier 
receives  less  than 
usual  charge 


No  tax  on  trans- 
portation of  company 
material 


All  pipe  line  trans- 
portation of  oil  taxed 


such  payment  evidenced  on  the  ticket  in  such  man- 
ner as  the  Commissioner,  with  the  approval  of  the 
Secretary,  may  by  regulation  prescribe. 

(c)  The  taxes  imposed  by  section  500  shall  apply 
to  all  services  of  facilities  specified  in  such  section 
when  rendered  for  hire,  whether  or  not  the  agency 
rendering  them  is  a  common  carrier.  In  case  a  car- 
rier (other  than  a  pipe  line)  principally  engaged  in 
rendering  transportation  services  or  facihties  for 
hire  does  not,  because  of  its  ownership  of  the  goods 
transported,  or  for  any  other  reason,  receive  the' 
amount  which  as  a  carrier  it  would  otherwise  charge, 
such  carrier  shall  pay  a  tax  equivalent  to  the  tax 
which  would  be  imposed  upon  the  transportation  of] 
such  goods  if  the  carrier  received  payment  for  such 
transportation,  such  tax,  if  it  can  not  be  computed 
from  actual  rates  or  tariffs  of  the  carrier,  to  be  com-i 
puted  on  the  basis  of  the  rates  or  tariffs  of  other' 
carriers  for  like  services  as  determined  by  the  Com- 
missioner.    In  the  case  of  any  carrier  (other  than^ 
a  pipe  line)  the  principal  business  of  which  is 
transport  goods  belonging  to  it  on  its  own  account' 
and  which  only  incidentally  renders  services   for 
hire,  the  tax  shall  apply  to  such  services  or  facihties 
only  as  are  actually  rendered  by  it  for  hire.  Nothing] 
in  this  or  the  preceding  section  shall  be  construed 
as  imposing  a  tax  (1)  upon  the  transportation  of 
any  conmaodity  which  is  necessary  for  the  use  of  the 
carrier  in  the  conduct  of  its  business  as  such  and  is 
intended  to  be  so  used  or  has  been  so  used;  or  (2) 
upon  the  transportation  of  company  material  trans- 
ported by  one  carrier,  which  constitutes  a  part  of  a. 
railroad  system,  for  another  carrier  which  is  also  a 
part  of  the  same  system. 

(d)  The  tax  imposed  by  subdivision  (e)  of  sec- 
tion 500  shall  apply  to  all  transportation  of  oil  by 
pipe  hne.    In  case  no  charge  for  transportation  is 


Tbanspobtatiok   axd   Insukance  103 

made,  by  reason  of  ownership  of  the  commodity 
transported,  or  for  any  other  reason,  the  person 
transporting  by  pipe  line  shall  pay  a  tax  equivalent 
to  the  tax  which  would  be  imposed  if  such  person 
received  payment  for  such  transportation,  and  if 
the  tax  can  not  be  computed  from  actual  bona  fide 
rates  or  tariffs,  it  shall  be  computed  ( 1 )  on  the  basis 
of  the  rates  or  tariflPs  of  other  pipe  lines  for  Uke 
services,  as  determined  by  the  Commissioner,  or  (2) 
if  no  such  rates  or  tariffs  exist,  on  the  basis  of  a 
reasonable  charge  for  such  transportation,  as  de- 
termined by  the  Commissioner. 

Sec.  502.  That  each  person  receiving  any  pay-  Returns  and  payment 
ments  referred  to  in  section  500  shall  collect  the  of  tax  collected 
amount  of  the  tax,  if  any,  imposed  by  such  section 
from  the  person  making  such  payments,  and  shall 
make  monthly  returns  under  oath,  in  duplicate,  and 
pay  the  taxes  so  collected  and  the  taxes  imposed 
upon  it  under  subdivision  (c)  or  (d)  of  section  501 
to  the  collector  of  the  district  in  which  the  principal 
office  or  place  of  business  is  located. 

No  carrier  collecting  the  taxes  imposed  by  sub-  Separate  listing  in 
division  (a)  or  (b)  of  section  500  shall  be  required  bill  of  lading  not 
to  list  the  amount  of  such  tax  separately  in  any  bill  '^®**"'^* 
of  lading,  freight  or  express  receipt,  or  other  similar 
document,  if  the  total  amount  of  the  transportation 
charge  and  the  tax  is  stated  therein. 

Any  person  making  a  refund  of  any  payment  up-  Refunds  of  tax 
on  which  tax  is  collected  under  this  section  may  re-  coUected 
pay  therewith  the  amount  of  the  tax  collected  on 
such  payment;  and  the  amount  so  repaid  may  be 
credited  against  amounts  included  in  any  subse- 
quent monthly  return. 

The  returns  required  under  this  section  shall  con-  Returns,  when  and 
tain  such  information,  and  be  made  at  such  times  how  made 
and  in  such  manner,  as  the  Commissioner,  with  the 


104 


RiTsir UB   Act 


Payment  of  Uz 
to  collector 


Ponalty 


approval  of  the  Secretary,  may  by  regulation  pre- 
scribe. 

The  tax  shall,  without  assessment  by  the  Commis- 
sioner or  notice  from  the  collector,  be  due  and  pay- 
able to  the  collector  at  the  time  so  fixed  for  filing 
the  return.  .If  the  tax  is  not  paid  when  due,  there 
shall  be  added  as  part  of  the  tax  a  penalty  of  5  per 
centum,  together  with  interest  at  the  rate  of  1  per 
centum  for  each  full  month,  from  the  time  when  the 
tax  became  due. 


Taz  on  insurance 

policies 

Date  efiectiT* 


Life  insurance 


Industrial  insurance 


fife  insurance 


Insurance. 

Sec.  508.  That  from  and  after  April  1,  1919, 
there  shaU  be  levied,  assessed,  collected,  and  paid, 
in  lieu  of  the  taxes  imposed  by  section  504  of  the 
Revenue  Act  of  1917,  the  following  taxes  on  the 
issuance  of  insurance  policies,  including,  in  the  case 
of  policies  issued  outside  the  United  States  (except 
those  taxable  under  subdivision  15  of  Schedule  A 
of  Title  XI),  their  delivery  within  the  United 
States  by  any  agent  or  broker,  whether  acting  for 
the  insurer  or  the  insured ;  such  taxes  to.  be  paid  by 
the  insurer,  or  by  such  agent  or  broker: 

(a)  Life  insurance:  A  tax  equivalent  to  8  cents 
on  each  $100  or  fractional  part  thereof  of  the 
amount  for  which  any  life  is  insured  under  any 
pohcy  of  insurance,  or  other  instrument,  by  what- 
ever name  the  same  is  called ;  Provided,  That  on  all 
policies  for  life  insurance  only  by  which  a  life  is  in- 
sured not  in  excess  of  $500,  issued  on  the  industrial 
or  weekly  or  monthly  payment  plan  of  insurance, 
the  tax  shall  be  40  per  centum  of  the  amount  of  the 
first  weekly  premium  or  20  per  centum  of  the 
amount  of  the  first  monthly  premium,  as  the  case 
may  be;  Provided  further.  That  on  poUcies  of 
group  hfe  insurance,  covering  groups  of  not  less 
than  25  lives  in  the  employ  of  the  same  person,  for 


TraxsfortatioxandInsubanck  105 

the  benefit  of  persons  other  than  the  employer,  the 
tax  shall  be  equivalent  to  4  cents  on  each  $100  of 
the  aggregate  amount  for  which  the  group  policy 
is  issued  and  of  any  net  increase  in  the  amount  of 
the  insurance  under  such  policy;  And  provided  fur- 
ther, That  on  all  policies  covering  Uf  e,  health,  and  Combined  life,  health 
accident  insurance  combined  in  one  pohcy  by  which  *"**  accident 
a  life  is  insured  not  in  excess  of  $500,  issued  on  the  '"•"*"^® 
industrial,  or  weekly  or  monthly  payment  plan  of 
insurance,  the  tax  shall  be  40  per  centum  of  the 
amount  of  the  first  weekly  premiimi  or  20  per  cen- 
tum of  the  amount  of  the  first  monthly  premium, 
as  the  case  may  be ; 

(b)  Marine,  inland,  and  fire  insurance:  A  tax  Marine,  inland  and 
equivalent  to  1  cent  on  each  dollar  or  fractional  part  ^®  insurance 
thereof  of  the  premium  charged  under  each  policy 

of  insurance  or  other  instrument  by  whatever  name 
the  same  is  called  whereby  insurance  is  made  or  re- 
newed upon  property  of  any  description  (including 
rents  or  profits),  whether  against  peril  by  sea  or 
inland  waters,  or  by  fire  or  lightning,  or  other  peril; 

(c)  Casualty  insurance:  A  tax  equivalent  to  1  Casualty  insurance 
cent  on  each  dollar  or  fractional  part  thereof  of  the 
premium  charged  under  each  pohcy  of  insurance  or 
obhgation  of  the  nature  of  indemnity  for  loss,  dam- 
age, or  liability  (except  bonds  and  policies  taxable 

under  subdivision  2  of  schedule  A  of  Title  XI)  is- 
sued or  executed  or  renewed  by  any  person  transact- 
ing the  business  of  employer's  habiUty,  workmen's 
compensation,  accident,  health,  tornado,  plate  glass, 
steam  boiler,  elevator,  burglary,  automatic  sprin- 
kler, automobile,  or  other  branch  of  insurance  (ex- 
cept life  insurance,  and  insurance  described  and 
taxed  in  the  preceding  subdivision) ;  Provided, 
That  in  case  of  policies  of  insurance  issued  on  the  Casualty  policies 
industrial  or  weekly  or  montlily  payment  plan  the  on  industrial  plan 
tax  shall  be  40  per  centum  of  the  amount  of  the 


100 


Rbvs  V  us   Act 


Exempt  potidei 
See  page  44 


Returns 


Payment 


Penalty 


first  weekly  premium  or  20  per  centum  of  the 
amount  of  the  first  monthly  premium,  as  the  case 
may  be; 

(d)  Policies  issued  by  any  corporation  enumer- 
ated in  section  231,  and  policies  of  reinsurance,  shall 
be  exempt  from  the  taxes  imposed  by  this  section. 

Sec.  504.  That  every  person  issuing  policies  of 
insurance  upon  the  issuance  of  which  a  tax  is  im- 
posed by  section  503  shall  make  montlily  returns 
under  oath,  in  duplicate,  and  pay  such  tax  to  the 
collector  of  the  district  in  which  the  principal  office 
or  place  of  business  of  such  person  is  located.  Such 
returns  shall  contain  such  information  and  be  made 
at  such  times  and  in  such  manner  as  the  Commis- 
sioner, with  the  approval  of  the  Secretary,  may  by 
regulation  prescribe. 

The  tax  shall,  without  assessment  by  the  Coomiis- 
sioner  or  notice  from  the  collector,  be  due  and  pay- 
able to  the  collector  at  the  time  so  fixed  for  filing 
the  return.  If  the  tax  is  not  paid  when  due,  there 
shall  be  added  as  part  of  the  tax  a  penalty  of  5  per 
centum,  together  with  interest  at  the  rate  of  1  per 
centum  for  each  full  month,  from  the  time  when 
the  tax  became  due. 


TITLE  VI. 
Tax  on  Beverages 

Sec.  600.  (a)  That  there  shall  be  levied  and  col-  oisUUed  «pirii« 
leeted  on  all  distilled  spirits  now  in  bond  or  that 
have  been  or  that  may  be  hereafter  produced  in  or 
imported  into  the  United  States,  except  such  dis- 
tilled spirits  as  are  subject  to  the  tax  provided  in 
section  604,  in  lieu  of  the  internal-revenue  taxes  now 
imposed  thereon  by  law,  a  tax  of  $2.20  (or,  if  with-  Rate  of  tax 
drawn  for  beverage  purposes  or  for  use  in  the  manu- 
facture or  production  of  any  article  used  or  in- 
tended for  use  as  a  beverage,  a  tax  of  $6.40)  on  each 
proof  gallon,  or  wine  gallon  when  below  proof,  and 
a  proportionate  tax  at  a  like  rate  on  all  fractional 
parts  of  such  proof  or  wine  gallon,  to  be  paid  by 
the  distiller  or  importer  when  withdrawn,  and  col- 
lected under  the  provisions  of  existing  law. 

(b)  That  the  tax  imposed  by  subdivision  (a)  on  Spirits  held  in  bond 
distilled  spirits  intended  for  beverage  purposes  shall  «*  •■^*"**  ®'  prohibition 
not  be  due  or  payable  on  such  spirits  while  stored  in 
any  distillery,  bonded  warehouse,  or  special  or  gen- 
eral bonded  warehouse,  and  which,  pursuant  to  any 
Act  of  Congress  or  proclamation  of  the  President  of 
the  United  States,  cannot  be  lawfully  sold  or  re- 
moved from  any  such  warehouse  during  the  period 
of  prohibition  fixed  by  such  Act  or  proclamation; 
and  all  warehousing  bonds  or  transportation  and 
warehousing  bonds  conditioned  for  the  payment  of 
tax  on  any  such  spirits  so  stored  on  the  date  such 
prohibition  takes  effect  shall  as  to  all  such  spirits 
actually  so  stored  be  cancelled  and  discharged,  pro- 

lOT 


108  RevexueAct 

vided  the  distiller  of  such  spirits  shall  in  lieu  of  such 
bonds  and  prior  to  their  cancellation  execute  a  bond 
in  a  penal  sum  of  not  less  than  $10,000,  with  sure- 
ties satisfactory  to  the  collector  of  the  district,  con- 
ditioned that  the  principal  shall,  during  the  period  * 
of  such  prohibition,  safely  keep  or  cause  to  be  kept 
in  good  condition  all  such  spirits  and  the  warehouse 
in  which  the  same  are  stored,  and  shall  not  remove 
or  suffer  to  be  removed  from  warehouse,  contrary 
to  law,  any  such  spirits  during  the  period  of  such 
prohibition ;  and  the  bond  herein  prescribed  shall  be 
in  such  further  sum  and  shall  contain  such  further  i 
conditions  as  the  Commissioner,  with  the  approval 
of  the  Secretary,  may  by  regulations  require.    The 
distiller  may,  subject  to  the  provisions  of  this  sec- 
tion, be  permitted  to  retain  in  any  such  bonded  | 
warehouse  distilled  spirits  on  which,  under  the  terms  ^ 
of  any  existing  bond,  the  tax  imposed  thereon  be-    j 
comes  due  and  payable  prior  to  the  date  such  pro- 
hibition takes  effect;  Provided,  That  on  the  re- 
moval of  such  prohibition  the  distiller  shall,  as  to 
all  spirits  as  to  which  the  bonded  period  fixed  by  | 
law  has  not  expired  and  which  remain  stored  in 
warehouse,  execute  new  and  satisfactory  bond  in 
the  form  required  by  existing  law,  conditioned  for  * 
the  payment  of  the  tax  on  all  such  spirits;  and  all 
provisions  of  existing  law  relating  to  such  bonded 
warehouses,  or  the  storage  of  spirits  therein,  or  to 
the  execution  of  new  or  additional  bonds,  so  far  as 
applicable,  shall  continue  in  force  as  to  all  distilled 
spirits  rebonded  under  the  provisions  of  this  section. 
Allowance  for  leakage       Upou  the  withdrawal  of  distlllcd  spirits  from 
while  in  bonded         boudcd  warehousc,  after  the  period  of  prohibition 
ware  ouse  j^^^  ended,  and  under  the  conditions  imposed  by 

section  50  of  an  Act  entitled  "An  Act  to  reduce  tax- 
ation, to  provide  revenue  for  the  support  of  the 
Government,  and  for  other  purposes,"  approved 


Tax   on   Bevebaoeb  lOB 

August  28,  1894,  an  allowance  for  loss  by  leakage 
or  other  unavoidable  cause,  not  exceeding  one  proof 
gallon  as  to  packages  of  a  capacity  of  not  less  than 
40  wine  gallons,  may  be  made  in  addition  to  that 
provided  in  said  section  50,  as  amended;  and  a  like 
additional  allowance  of  one  proof  gallon  as  to  each 
package  withdrawn  may  be  made  for  each  period  of 
four  months,  or  fraction  thereof,  for  such  spirits  as 
shall  have  remained  in  warehouse  during  the  period 
of  prohibition  and  after  the  expiration  of  the  maxi- 
mum leakage  period  fixed  by  that  section. 

Under  regulations  prescribed  by  the  Secretary,  imported  spirits, 
any  imported  distilled  spirits,  wines  or  other  liquors  ^"e*  *»<*  ^<»"®"  "*y 
which  may  be  in  any  customs  bonded  warehouse  '*"**"*" 
under  the  customs  laws  on  the  date  such  prohibition 
takes  effect  shall  be  permitted  to  remain  therein 
without  payment  of  any  taxes  or  duties  thereon, 
beyond  the  three-year  period  provided  in  section 
2971  of  the  Revised  Statutes,  during  such  period 
of  prohibition;  and  may  be  exported  at  any  time 
during  such  extended  period.  Any  imported  spirits, 
wines  or  other  liquors  as  to  which  the  three-year 
bonded  period  may  expire  after  the  passage  of  this 
Act  and  prior  to  the  date  such  prohibition  takes  ef- 
fect may  at  the  option  of  the  owner  remain  in  bond 
during  such  period  of  prohibition. 

(c)  In  lieu  of  the  internal-revenue  tax  now  im-  imported  perfumes, 
posed  thereon  by  law  there  shall  be  levied  and  col-  containing  distilled 
lected  upon  all  perfumes  hereafter  imported  into  **""** 
the  United  States  containing  distilled  spirits,  a  tax 
of  $1.10  per  wine  gallon,  and  a  proportionate  tax 
at  a  like  rate  on  all  fractional  parts  of  such  wine 
gallon.    Such  tax  shall  be  collected  by  the  collector 
of  customs  and  deposited  as  internal-revenue  col- 
lections, under  such  rules  and  regulations  as  the 
Commissioner,  with  the  approval  of  the  Secretary, 
may  prescribe. 


110 


Revekue   Act 


Importation  of  spirits 
prohibited 


Exceptions 


Transfer  of  spirits 
to  warehouse 


Regulations  govern- 
ing transfer 


Sec.  601.  That  no  distilled  spirits  produced  after 
October  3,  1917,  shall  be  imported  into  the  United 
States  from  any  foreign  country,  or  from  the  Vir- 
gin Islands  (unless  produced  from  products  the 
growth  of  such  islands,  and  not  then  into  any  State 
or  Territory  or  District  of  the  United  States  in 
which  the  manufacture  or  sale  of  intoxicating 
hquor  is  prohibited),  or  from  Porto  Rico,  or  the 
PhiUppine  Islands.  Under  such  rules,  regulations, 
and  bonds  as  the  Secretary  may  prescribe,  the  pro- 
visions of  this  section  shall  not  apply  to  distilled 
spirits  imported  for  other  than  (1)  beverage  pur- 
poses or  (2)  use  in  the  manufacture  or  production 
of  any  article  used  or  intended  for  use  as  a  bever- 
age. 

Sec.  602.  That  at  registered  distilleries  produc- 
ing alcohol,  or  other  high-proof  spirits,  packages 
may  be  filled  with  such  spirits  reduced  to  not  less 
than  one  hundred  proof  from  the  receiving  cisterns 
and  tax  paid  without  being  entered  into  bonded 
warehouse.  Such  spirits  may  be  also  transferred 
from  the  receiving  cisterns  at  such  distilleries,  by 
means  of  pipe  lines,  direct  to  storage  tanks  in  the 
bonded  warehouse  and  may  be  warehoused  in  such 
storage  tanks.  Such  spirits  may  be  also  transferred 
in  tanks  or  tank  cars  to  general  bonded  warehouses 
for  storage  therein,  either  in  storage  tanks  in  such 
warehouses  or  in  the  tanks  in  which  they  were 
transferred.  Such  spirits  may  also  be  transferred 
from  receiving  cisterns  or  warehouse  storage  tanks 
to  barrels,  drums,  tanks,  tank  cars,  or  other  ap- 
proved containers,  and  may  be  transported  in  such 
containers  for  exportation  or  other  lawful  purposes. 
The  Commissioner,  with  the  approval  of  the  Secre- 
tary, is  hereby  empowered  to  prescribe  all  neces- 
sary regulations  relating  to  the  drawing  oflF,  trans- 
ferring, gauging,  storing,  and  transporting  of  such 


Tax   ok    Beverages  IIJ 

spirits;  the  records  to  be  kept  and  returns  to  be 
made;  the  size  and  kind  of  packages  and  tanks  to 
be  used;  the  marking,  branding,  numbering,  and 
stamping  of  such  packages  and  tanks ;  the  kinds  of 
stamps,  if  any,  to  be  used ;  and  the  time  and  manner 
of  paying  the  tax;  the  kind  of  bond  and  the  penal 
sum  of  same.  The  tax  prescribed  by  law  must  be 
paid  before  such  spirits  are  removed  from  the  dis- 
tillery premises,  or  from  general  bonded  ware- 
house in  the  case  of  spirits  transferred  thereto,  ex- 
cept as  otherwise  provided  by  law. 

Under  such  regulations  as  the  Commissioner, 
with  the  approval  of  the  Secretary,  may  prescribe, 
distilled  spirits  may  hereafter  be  drawn  from  re- 
ceiving cisterns  and  deposited  in  distillery  ware- 
houses without  having  affixed  to  the  packages  con- 
taining the  same,  distillery  warehouse  stamps,  and 
such  packages,  when  so  deposited  in  warehouse,  may 
be  withdrawn  therefrom  on  the  original  gauge 
where  the  same  have  remained  in  such  warehouse 
for  a  period  not  exceeding  thirty  days  from  the 
date  of  deposit. 

Under  such  regulations  as  the   Commissioner,  Ethyl  alcohol  used 
with  the  approval  of  the  Secretary,  may  prescribe,  ^®'  non-beverage 
the   manufacture,   warehousing,   withdrawal,    and  p""^""* 
shipment,  under  the  provisions  of  existing  law,  of 
ethyl  alcohol  for  other  than  (1)  beverage  purposes 
or  ( 2 )  use  in  the  manufacture  or  production  of  any 
article  used  or  intended  for  use  as  a  beverage,  and  Denatured  alcohol 
denatured  alcohol,  may  be  exempted  from  the  pro- 
visions of  section  3283  of  the  Revised  Statutes. 

The   Commissioner,  with  the  approval   of  the  '^''^"'*^**"^'"[  ^ ,, , 
Secretary,  may  by  regulations  exempt  distillers  of  ^u2o\^ "* **  * 
ethyl  alcohol,  for  use  in  the  production  of  munitions 
of  war,  or  for  other  non-beverage  purposes,  from 
so  much  of  the  provisions  of  sections  3264,  3285, 
or  3309  of  the  Revised  Statutes,  and  Acts  amenda- 


112 


Regulations  for 
transfer  for  de> 
naturation 


Allowances  for 
leakage  and  loss 


Floor  tax  on  spirits 
in  retailers'  hands 


Rz VENUE   Act 

tory  thereof,  respecting  the  survey  of  distilleries 
the  period  of  fermentation,  the  fQling  and  emptying 
of  fermenting  tubs,  and  assessments,  as,  in  his  judg- 
ment, may  be  expedient;  Provided,  That  the  bond 
prescribed  in  section  3260  of  the  Revised  Statutes 
shall,  in  the  cases  herein  provided,  be  in  such  sum 
and  contain  such  further  conditions  as  the  Conmiis- 
sioner  may  require. 

Sec.  603.  That  under  such  regulations  as  the 
Commissioner,  with  the  approval  of  the  Secretary, 
may  prescribe,  ethyl  alcohol  of  not  less  than  180  de- 
grees proof,  produced  at  any  central  distilling  and 
denaturing  plant  estabUshed  under  the  provisions 
of  subsection  2,  paragraph  N,  of  section  IV  of  the 
Act  entitled  "An  Act  to  reduce  tariff  duties  and  to 
provide  revenue  for  the  Government,  and  for  other 
purposes,"  approved  October  3,  1913,  may  be  re- 
moved from  such  plant  to  any  central  denaturing 
bonded  warehouse  for  denaturation,  or  may,  before 
or  after  denaturation,  be  removed  from  such  plant 
or  from  such  denaturing  bonded  warehouse,  free  of 
tax,  for  use  of  the  United  States  or  for  shipment  to 
any  nation  while  engaged  against  the  German  Gov- 
ernment in  the  present  war,  and  the  removal  herein 
authorized  may  be  made  in  such  tank  vessels,  tank 
cars,  drums,  casks,  or  other  containers  as  may  be 
approved  by  the  Commissioner.  It  shall  be  lawful, 
under  regulations  prescribed  by  the  Commissioner, 
with  the  approval  of  the  Secretary,  for  an  allowance 
to  be  made  for  leakage  or  loss  by  unavoidable  acci- 
dent and  without  fault  or  negligence  of  the  distiller, 
owner,  carrier,  or  his  agents  or  employees,  which! 
may  occur  during  the  transportation  of  such  spirits] 
or  while  the  same  are  lawfully  stored  on  either  of] 
the  premises  herein  described. 

Sec.  604.  That  upon  all  distilled  spirits  producec 
in  or  imported  into  the  United  States  upon  which! 


I 


Tax   ok    Beverages  118 

the  internal-revenue  tax  now  imposed  by  law  has 
been  paid,  and  which,  on  the  day  after  the  passage 
of  this  Act,  are  held  by  any  person  and  intended  for 
sale  or  for  use  in  the  manufacture  or  production  of 
any  article  intended  for  sale,  there  shall  be  levied, 
assessed,  collected,  and  paid  a  floor  tax  of  $3.20  if 
intended  for  sale  for  beverage  purposes  or  for  use 
in  the  manufacture  or  production  of  any  article  used 
or  intended  for  use  as  a  beverage  on  each  proof  gal- 
lon, and  a  proportionate  tax  at  a  like  rate  on  all 
fractional  parts  of  such  proof  gallon. 

Sec.  605.  That  in  addition  to  the  tax  imposed  by  Rectified  spintc 
this  Act  on  distilled  spirits  and  wines,  there  shall 
be  levied,  assessed,  collected,  and  paid,  in  lieu  of  the 
tax  imposed  by  section  304  of  the.  Revenue  Act  of 
1917,  a  tax  of  30  cents  on  each  proof  gallon  and  a 
proportionate  tax  at  a  like  rate  on  all  fractional 
parts  of  such  proof  gallon  on  all  distilled  spirits  or 
wines  hereafter  rectified,  purified,  or  refined  in  such 
manner,  and  on  all  mixtures  hereafter  produced  in 
such  manner,  that  the  person  so  rectifying,  purify- 
ing, refining,  or  mixing  the  same  is  a  rectifier  within 
the  meaning  of  section  3244  of  the  Revised  Statutes, 
as  amended ;  Provided,  That  this  tax  shall  not  ap- 
ply to  gin  produced  by  the  redistillation  of  a  pure  cin 
spirit  over  juniper  berries  and  other  aromatics. 

Upon  all  such  articles  heretofore  produced,  and  Floor  ux  on  rectified 
which  on  the  day  after  the  passage  of  this  Act  are  "p*"'* 
held  by  any  person  and  intended  for  sale,  there  shall 
be  levie^,  assessed,  collected,  and  paid  a  floor  tax  of 
15  cents  on  each  proof  gallon,  and  a  proportionate 
tax  at  a  like  rate  on  all  fractional  parts  of  each  proof 
gallon;  and  all  such  distilled  spirits  so  held  and  not 
contained  in  the  distillers'  original  stamped  pack- 
ages, or  in  bottles  or  other  containers  bearing  the 
distillers'  original  labels,  shall  for  the  purpose  of 
this  section  be  regarded  as  rectified  spirits. 


114 

Reduction  in  proof 
prohilnted 


Exemptions 


Regulations  to  be 
uniform 


Re VE NUE   Act 

When  the  process  of  rectification  is  completed 
and  the  taxes  prescribed  by  this  section  have  been 
paid,  it  shall  be  unlawful  for  the  rectifier  or  other 
dealer  to  reduce  in  proof  or  increase  in  volume  such 
spirits  or  wine  by  the  addition  of  water  or  other 
substance ;  nothing  herein  contained  shall,  however, 
prevent  a  rectifier  from  using  again  in  the  process 
of  rectification  spirits  already  rectified  and  upon 
which  the  taxes  have  theretofore  been  paid. 

The  taxes  imposed  by  this  section  shall  not  attach 
to  cordials  or  liqueurs  on  which  a  tax  is  imposed  and 
paid  under  section  611  or  613,  nor  to  the  mixing 
and  blending  of  wines,  where  such  blending  is  for 
the  sole  purpose  of  perfecting  such  wines  accord- 
ing to  commercial  standards,  nor  to  blends  made  ex- 
clusively of  two  or  more  pure  straight  whiskies  aged 
in  wood  for  a  period  not  less  than  four  years  and 
without  the  addition  of  coloring  or  fiavoring  matter 
or  any  other  substance  than  pure  water  and  if  not 
reduced  below  ninety  proof;  Provided,  That  such 
blended  whiskies  shall  be  exempt  from  tax  under 
this  section  only  when  compounded  under  the  im- 
mediate supervision  of  a  revenue  officer,  in  such 
tanks  and  under  such  conditions  and  supervision  as 
the  Commissioner,  with  the  approval  of  the  Secre- 
tary, may  prescribe. 

'All  distilled  spirits  or  wines  taxable  under  this 
section  shall  be  subject  to  uniform  regulations  con- 
cerning the  use  thereof  in  the  manufacture,  blend-j 
ing,  compounding,  mixing,  marking,  branding,  and] 
sale  of  whisky  and  rectified  spirits,  and  no  discrimi-j 
nation  whatsoever  shall  be  made  by  reason  of  a  dif- 
ference in  the  character  of  the  material  from  which] 
same  may  have  been  produced. 

The  business  of  a  rectifier  of  spirits  shall  be  car-| 
ried  on,  and  the  tax  on  rectified  spirits  shall  be  paid, 
under  such  rules,  regulations,  and  bonds  as  may  be! 


4 


I 


Tax  ov   Beveraoes  US 

prescribed  by  the  Commissioner,  with  the  approval 
of  the  Secretary. 

Whoever  violates  any  of  the  provisions  of  this  sec-  Penalties 
tion  shall  be  deemed  to  be  guilty  of  a  misdemeanor 
and,  upon  conviction,  shall  be  fined  not  more  than 
$1,000  or  imprisoned  not  more  than  two  years,  and 
shall,  in  addition,  be  hable  to  double  the  tax  evaded, 
together  with  the  tax,  to  be  collected  by  assessment 
or  on  any  bond  given. 

Sec.  606.  That  hereafter  collectors  shall  not  fur-  Use  of  stamps 
nish  wholesale  liquor  dealer's  stamps  in  Ueu  of  and 
in  exchange  for  stamps  for  rectified  spirits  unless 
the  package  covered  by  stamp  for  rectified  spirits 
is  to  be  broken  into  smaller  packages. 

The  Commissioner,  with  the  approval  of  the 
Secretary,  is  authorized  to  discontinue  the  use  of  the 
following  stamps  whenever  in  his  judgment  the  in- 
terests of  the  Government  will  be  subserved 
thereby: 

Distillery  warehouse,  special  bonded  warehouse, 
special  bonded  rewarehouse,  general  bonded  ware- 
house, general  bonded  retransfer,  transfer  brandy, 
export  tobacco,  export  cigars,  export  oleomargar- 
ine, and  export  fermented-liquor  stamps. 

Sec.  607.   That  the  Commissioner,  with  the  ap-  installation  of 
proval  of  the  Secretary,  is  hereby  authorized  to  re-  »??»'«*"«  f®/ 

•  i    T   i*n      •         1  •  .'P    •         1  T    protection  of  the 

quire  at  distilleries,  breweries,  rectiiymg  houses,  and  revenue 
wherever  else  in  his  judgment  such  action  may  be 
deemed  advisable,  the  installation  of  meters,  tanks, 
pipes,  or  any  other  apparatus  for  the  purpose  of 
protecting  the  revenue,  and  such  meters,  tanks,  and 
pipes  and  all  necessary  labor  incident  thereto  shall 
be  at  the  expense  of  the  person  on  whose  premises 
the  installation  is  required.  Any  such  person  refus- 
ing or  neglecting  to  install  such  apparatus  when  so 
required  by  the  Commissioner  shall  not  be  permitted 
to  conduct  business  on  such  premises. 


116 


RiYEirux   Act 


Beer  and  fermented 
liquor 


Fermented  liquor 
used  in  distilling 


Transfers  from 
brewery  to  distillery 


Sec.  608.  That  there  shall  be  levied  and  collected 
on  all  beer,  lager  beer,  ale,  porter,  and  other  similar 
fermented  liquor,  containing  one-half  of  one  per 
centum,  or  more,  of  alcohol,  brewed  or  manufac- 
tured and  hereafter  sold,  or  removed  for  consump- 
tion or  sale,  within  the  United  States,  by  whatever 
name  such  liquors  may  be  called,  in  lieu  of  the  in- 
ternal-revenue taxes  now  imposed  thereon  by  law, 
a  tax  of  $6.00  for  every  barrel  containing  not  more 
than  thirty-one  gallons,  and  at  a  like  rate  for  any 
other  quantity  or  for  the  fractional  parts  of  a  barrel 
authorized  and  defined  by  law,  to  be  collected  under 
the  provisions  of  existing  law. 

Sec.  609.  That  from  and  after  the  passage  of 
this  Act  taxable  fermented  liquors  may  be  conveyed 
without  payment  of  tax  from  the  brewery  premises 
where  produced  to  a  contiguous  industrial  distillery 
of  either  class  established  under  the  Act  entitled 
"An  Act  to  reduce  tariflF  duties  and  to  provide  reve- 
nue for  the  Government,  and  for  other  purposes," 
approved  October  3,  1913,  to  be  used  as  distilling 
material,  and  the  residue  from  such  distillation,  con- 
taining less  than  one-half  of  1  per  centum  of  alco- 
hol by  volume,  which  is  to  be  used  in  making  bev- 
erages, may  be  manipulated  by  cooling,  flavoring, 
carbonating,  settling,  and  filtering  on  the  distillery 
premises  or  elsewhere. 

The  removal  of  the  taxable  fermented  liquor 
from  the  brewery  to  the  distillery  and  the  operation 
of  the  distillery  and  removal  of  the  residue  there- 
from shall  be  under  the  supervision  of  such  officer 
or  officers  as  the  Commissioner  shall  deem  proper, 
and  the  Commissioner,  with  the  approval  of  the 
Secretary,  is  hereby  authorized  to  make  such  regu- 
lations from  time  to  time  as  may  be  necessary  to 
give  force  and  effect  to  this  section  and  to  safeguard 
the  revenue. 


Tax  ov  Bstseagii  117 

^  Sec.  610.  That  natural  wine  within  the  meaning  Wine»  defined 
of  this  Act  shall  be  deemed  to  be  the  product  made 
from  the  normal  alcohohc  fermentation  of  the  juice 
of  sound,  ripe  grapes,  without  addition  or  abstrac- 
tion, except  such  as  may  occur  in  the  usual  cellar 
treatment  or  clarifying  and  aging;  Provided,  how- 
ever. That  the  product  made  from  the  juice  of 
sound,  ripe  grapes  by  complete  fermentation  of  the 
must  under  proper  cellar  treatment  and  corrected 
by  the  addition  (under  the  supervision  of  a  ganger 
or  storekeeper-gauger  in  the  capacity  of  ganger) 
of  a  solution  of  water  and  pure  cane,  beet,  or  dex- 
trose sugar  (containing,  respectively,  not  less  than 
95  per  centum  of  actual  sugar,  calculated  on  a  dry 
basis)  to  the  must  or  to  the  wine,  to  correct  nat- 
ural deficiencies,  when  such  addition  shall  not  in- 
crease the  volume  of  the  resultant  product  more 
than  35  per  centum,  and  the  resultant  product  does 
not  contain  less  than  five  parts  per  thousand  of  acid 
before  fermentation  and  not  more  than  13  per  cen- 
timi  of  alcohol  after  complete  fermentation,  shall 
be  deemed  to  be  wine  within  the  meaning  of  this 
Act,  and  may  be  labeled,  transported,  and  sold  as 
"wine,"  qualified  by  the  name  of  the  locality  where 
produced,  and  may  be  further  qualified  by  the  name 
of  its  own  particular  type  or  variety :  And  provided 
further.  That  wine  as  defined  in  this  section  may  be 
sweetened  with  cane  sugar  or  beet  sugar  or  pure 
condensed  grape  must  and  fortified  under  the  pro- 
visions of  this  Act,  and  wines  so  sweetened  or  forti- 
fied shall  be  considered  sweet  wine  within  the  mean- 
ing of  this  Act. 

Sec.  611.  That  upon  all  still  wines,  including  ver-  wbes,  tax  on 
muth,  and  all  artificial  or  imitation  wines  or  com- 
pounds sold  as  still  wine,  which  are  hereafter  pro- 
duced in  or  imported  into  the  United  States,  or 
which  on  the  day  after  the  passage  of  this  Act  are 


118  RevevueAct 

on  any  winery  premises  or  other  bonded  premises 
or  in  transit  thereto  or  at  any  customhouse,  there 
shall  be  levied,  collected,  and  paid,  in  lieu  of  the 
internal-revenue  taxes  now  imposed  thereon  by  law, 
taxes  at  rates  as  follows,  when  sold,  or  removed  for 
consumption  or  sale :  ^ 

^^*®*  On  wines  containing  not  more  than  14  per  cen- 

tum of  absolute  alcohol,  16  cents  per  wine  gallon, 
the  per  centum  of  alcohol  taxable  under  this  section 
to  be  reckoned  by  volume  and  not  by  weight ; 

On  wines  containing  more  than  14  per  centum 
and  not  exceeding  21  per  centimi  of  absolute  alco- 
hol, 40  cents  per  wine  gallon; 

On  wines  containing  more  than  21  per  centum 
and  not  exceeding  24  per  centum  of  absolute  alco- 
hol, $1  per  wine  gallon; 

All  such  wines  containing  more  than  24  per  cen- 
tum of  absolute  alcohol  by  volume  shall  be  classed 
as  distilled  spirits  and  shall  pay  tax  accordingly. 

Grape  brandy  Sec.  612.   That  uudcr  such  regulations  and  offi- 

cial supervision  and  upon  the  giving  of  such  notices, 
entries,  bonds,  and  other  security  as  the  Commis- 
sioner, with  the  approval  of  the  Secretary,  may 
prescribe,  any  producer  of  wines  defined  under  the 
provisions  of  this  title,  may  withdraw  from  any 
fruit  distillery  or  special  bonded  warehouse  grape 
brandy,  or  wine  spirits,  for  the  fortification  of  such 
wines  on  the  premises  where  actually  made;  Pro- 
vided, That  there  shall  be  levied  and  assessed 
against  the  producer  of  such  wines  a  tax  (in  lieu  of 
the  internal-revenue  tax  now  imposed  thereon  by 
law)  of  60  cents  per  proof  gallon  of  grape  brandy 
or  wine  spirits  whenever  withdrawn  and  hereafter 
so  used  by  him  in  the  fortification  of  such  wiiics  dur- 
ing the  preceding  month,  which  assessment  shall  be 
paid  by  him  within  ten  months  from  the  date  of  no- 
tice thereof;  Provided  further,  That  nothing  con- 


Tax   ok    Bevsraoes  119 

tained  in  this  section  shall  be  construed  as  exempt- 
ing any  wines,  cordials,  liqueurs,  or  similar  com- 
pounds from  the  payment  of  any  tax  provided  for  in 
this  title. 

Sec.  613.  That  upon  the  following  articles  which 
are  hereafter  produced  in  or  imported  into  the 
United  States,  or  which  on  the  day  after  the  pas- 
sage of  this  Act  are  on  any  winery  premises  or  other 
bonded  premises  or  in  transit  thereto  or  at  any  cus- 
tomhouse, there  shall  be  levied,  collected,  and  paid 
taxes  at  rates  as  follows,  when  sold,  or  removed  for 
consumption  or  sale: 

On  each  bottle  or  other  container  of  champagne  Champagne 
or  sparkling  wine,  12  cents  on  each  one-half  pint  or 
fraction  thereof; 

On  each  bottle  or  other  container  of  artificially  Carbonated  wine* 
carbonated  wine,  6  cents  on  each  one-half  pint  or 
fraction  thereof ; 

On  each  bottle  or  other  container  of  liqueurs,  cor-  Sweet  wine 
dials,  or  similar  compounds,  by  whatever  name  sold 
or  offered  for  sale,  containing  sweet  wine  fortified 
with  grape  brandy,  6  cents  on  each  one-half  pint  or 
fraction  thereof. 

The  tax  imposed  by  this  section  shall,  in  the  case 
of  any  article  upon  which  a  corresponding  internal- 
revenue  tax  is  now  imposed  by  law,  be  in  lieu  of 
such  tax. 

Sec.  614.  That  upon  all  articles  specified  in  sec-  Floor  tai  on  wines 
tion  611  or  613  upon  which  the  internal-revenue  tax 
now  imposed  by  law  has  been  paid  and  whiv-h  are 
on  the  day  after  the  passage  of  this  Act  held  by  any 
person  and  intended  for  sale,  there  shall  be  levied, 
collected,  and  paid  a  floor  tax  equal  to  the  diflPer- 
ence  between  the  tax  imposed  by  this  Act  and  the 
tax  so  paid. 

Sec.  615.  That  upon  all  sweet  wines  held  for  sale  Floor  i«x  on  tweet 
by  the  producer  thereof  upon  the  day  after  the  pas-  ^"** 


120 


Reve  N  UE   Act 


Method  of  payment 
of  tax 


Act  of  October  1, 
1890,  amended 


sage  of  this  Act  there  shall  be  levied,  assessed,  col- 
lected, and  paid  a  floor  tax  equivalent  to  30  cents 
per  proof  gallon  upon  the  grape  brandy  or  wine 
spirits  used  in  the  fortification  of  such  wine. 

Sec.  616.  That  the  taxes  imposed  by  section  611 
or  613  shall  be  paid  by  stamp  on  removal  of  the 
wines  from  the  customhouse,  winery,  or  other 
bonded  place  of  storage  for  consumption  or  sale, 
and  every  person  hereafter  producing,  or  having  in 
his  possession  or  under  his  control  when  this  title 
takes  eflfect,  any  wines  subject  to  the  tax  imposed 
in  section  611  or  613  shall  file  such  notice,  describ- 
ing the  premises  on  which  such  wines  are  produced 
or  stored;  shall  execute  a  bond  in  such  form;  shall 
make  such  inventories  under  oath;  and  shall,  prior 
to  sale  or  removal  for  consumption,  affix  to  each 
cask  or  vessel  containing  such  wine  such  marks, 
labels,  or  stamps  as  the  Commissioner,  with  the  ap- 
proval of  the  Secretary,  may  from  time  to  time  pre- 
scribe; and  the  premises  described  in  such  notice 
shall,  for  the  purpose  of  this  Act,  be  regarded  as 
bonded  premises.  But  the  provisions  of  this  section, 
except  as  to  payment  of  tax  and  the  affixing  of  the 
required  stamps  or  labels,  shall  not  apply  to  wines 
held  by  retail  dealers,  as  defined  in  section  3244  of 
the  Revised  Statutes,  nor,  subject  to  regulations 
prescribed  by  the  Commissioner,  with  the  approval 
of  the  Secretary,  shall  the  tax  imposed  by  section 
611  apply  to  wines  produced  for  the  family  use  of 
the  duly  registered  producer  thereof  and  not  sold 
or  otherwise  removed  from  the  place  of  manufacture 
and  not  exceeding  in  any  case  two  hundred  gallons 
per  year. 

Sec.  617.  That  sections  42,  43,  and  45  of  the  Act 
entitled  "An  Act  to  reduce  the  revenue  and  equaUze 
duties  on  imports,  and  for  other  purposes,"  ap- 
proved October  1,  1890,  as  amended  by  section  68 


Tax   ok   Bevebaoxs  Ul 

of  the  Act  entitled  "An  Act  to  reduce  taxation,  to 
provide  revenue  for  the  Government,  and  for  other 
purposes,"  approved  August  27,  1894,  are  further 
amended  to  read  as  follows : 

"Sec.  42.  That  any  producer  of  pure  sweet  wines  ReguUtiont  for 
may  use  in  the  preparation  of  such  sweet  wines,  un-  production  of  sweet 
der  such  regulations  and  after  the  fiUng  of  such  no-  ^"* 
tices  and  bonds,  together  with  the  keeping  of  such 
records  and  the  rendition  of  such  reports  as  to  ma- 
terials and  products  as  the  Commissioner  of  In- 
ternal Revenue,  with  the  approval  of  the  Secretary 
of  the  Treasury,  may  prescribe,  wine  spirits  pro- 
duced by  any  duly  authorized  distiller,  and  the  Com- 
missioner of  Internal  Revenue,  in  determining  the 
Uability  of  any  distiller  of  wine  spirits  to  assess- 
ment under  section  3309  of  the  Revised  Statutes, 
is  authorized  to  allow  such  distiller  credit  in  his  com- 
putations for  the  wine  spirits  withdrawn  to  be  used 
in  fortifying  sweet  wines  under  this  Act. 

"Sec.  43.  That  the  wine  spirits  mentioned  in  sec-  Wme  spirits  defined 
tion  42  is  the  product  resulting  from  the  distillation 
of  fermented  grape  juice,  to  which  water  may  have 
been  added  prior  to,  during,  or  after  fermentation, 
for  the  sole  purpose  of  facilitating  the  fermentation 
and  economical  distillation  thereof,  and  shall  be  held 
to  include  the  product  from  grapes  or  their  resi- 
dues commonly  known  as  grape  brandy,  and  shall 
include  conmiercial  grape  brandy  which  may  have 
been  colored  with  burnt  sugar  or  caramel;  and  the 
pure  sweet  wine  which  may  be  fortified  with  wine  Pure  sweet  wine 
spirits  under  the  provisions  of  this  Act  is  fermented  defined 
or  partially  fermented  grape  juice  only,  with  the 
usual  cellar  treatment,  and  shall  contain  no  other 
substance  whatever  introduced  before,  at  the  time 
of,  or  after  fermentation,  except  as  herein  expressly 
provided;  Provided,  That  the  addition  of  pure 
boiled  or  condensed  grape  must  or  pure  crystallized 


122  Revekue   Act 

cane  or  beet  sugar,  or  pure  dextrose  sugar  contain- 
ing, respectively,  not  less  than  95  per  centum  of  ac- 
tual sugar,  calculated  on  a  dry  basis,  or  water,  or 
any  or  all  of  them,  to  the  pure  grape  juice  before 
fermentation,  or  to  the  fermented  product  of  such 
grape  juice,  or  to  both,  prior  to  the  fortification 
herein  provided  for,  either  for  the  purpose  of  per- 
fecting sweet  wines  according  to  commercial  stand- 
ards or  for  mechanical  purposes,  shall  not  be  ex- 
cluded by  the  definition  of  pure  sweet  wine  afore- 
said; Provided,  however.  That  the  cane  or  beet  su- 
gar, or  pure  dextrose  sugar  added  for  sweetening 
purposes  shall  not  be  in  excess  of  11  per  centum  of 
the  weight  of  the  wine  to  be  fortified ;  And  provided 
further.  That  the  addition  of  water  herein  author- 
ized shall  be  under  such  regulations  as  the  Commis- 
sioner of  Internal  Revenue,  with  the  approval  of 
the  Secretary  of  the  Treasury,  may  from  time  to 
time  prescribe;  Provided,  however.  That  records 
kept  in  accordance  with  such  regulations  as  to  the 
percentage  of  saccharine,  acid,  alcohohc,  and  added 
water  content  of  the  wine  offered  for  fortification 
shall  be  open  to  inspection  by  any  official  of  the  De- 
partment of  Agriculture  thereto  duly  authorized 
by  the  Secretary  of  Agriculture;  but  in  no  case 
shall  such  wines  to  which  water  has  been  added  be 
eligible  for  fortification  under  the  provisions  of  this 
Act.  where  the  same,  after  fermentation  and  before 
fortification,  have  an  alcoholic  strength  of  less  than 
5  per  centum  of  their  volume. 
Withdrawal  of  wine  "Sec.  45.   That  uudcr  such  regulations  and  offi- 

spmts  from  bond        ^j^j  supcrvisiou,  and  upou  the  execution  of  such 

entries  and  the  giving  of  such  bonds,  bills  of  lading, 
and  other  security  as  the  Conmiissioner  of  Internal 
Revenue,  with  the  approval  of  the  Secretary  of  the 
Treasury,  shall  prescribe,  any  producer  of  pure 
sweet  wines  as  defined  by  this  Act  may  withdraw 


Tax  oir   Bxvbkaosi  ISS 

wine  spirits  from  any  special  bonded  warehouse  in 
original  packages  or  from  any  registered  distillery 
in  any  quantity  not  less  than  eighty  wine  gallons, 
and  may  use  so  much  of  the  same  as  may  be  required  ^^^^^  j^ 
by  him  under  such  regulations,  and  after  the  filing  fortification 
of  such  notices  and  bonds  and  the  keeping  of  such 
records  and  the  rendition  of  such  reports  as  to  ma- 
terials and  products  and  the  disposition  of  the  same 
as  the  Commissioner  of  Internal  Revenue,  with  the 
approval  of  the  Secretary  of  the  Treasury,  shall 
prescribe,  in  fortifying  the  pure  sweet  wines  made 
by  him,  and  for  no  other  purpose,  in  accordance  with 
the  foregoing  limitations  and  provisions;  and  the 
Commissioner  of  Internal  Revenue,  with  the  ap- 
proval of  the  Secretary  of  the  Treasury,  is  author- 
ized whenever  he  shaU  deem  it  to  be  necessary  for 
the  prevention  of  violations  of  this  law  to  prescribe 
that  wine  spirits  withdrawn  under  this  section  shall 
not  be  used  to  fortify  wines  except  at  a  certain  dis- 
tance prescribed  by  him  from  any  distillery,  recti- 
fying house,  winery,  or  other  establishment  used 
for  producing  or  storing  distilled  spirits,  or  for  mak- 
ing or  storing  wines  other  than  wines  which  are  so 
fortified,  and  that  in  the  building  in  which  such  for- 
tification of  wines  is  practiced  no  wines  or  spirits 
other  than  those  permitted  by  this  regulation  shall 
be  stored  in  any  room  or  part  of  the  building  in 
which  fortification  of  wines  is  practiced.  The  use 
of  wine  spirits  for  the  fortification  of  sweet  wines 
under  this  Act  shall  be  under  the  immediate  super- 
vision of  an  officer  of  internal  revenue,  who  shall 
make  returns  describing  the  kinds  and  quantities 
of  wine  so  fortified,  and  shall  affix  such  stamps  and 
seals  to  the  packages  containing  such  wines  as  may 
be  prescribed  by  the  Commissioner  of  Internal 
Revenue,  with  the  approval  of  the  Secretary  of  the 
Treasury;  and  the  Commissioner  of  Internal  Reve- 


124 


REYsiirux  Act 


Transfer  of  wines 
from  one  bonded 
warehouse  to  another 
or  to  a  distillery 


Use  of  mne  in  pro- 
duction of  non- 
beverage  alcohol 


nue,  with  the  approval  of  the  Secretary  of  the 
Treasury,  shall  provide  by  regulations  the  time 
within  which  wines  so  fortified  with  the  wine  spirits 
so  withdrawn  may  be  subject  to  inspection,  and  for 
fijial  accounting  for  the  use  of  such  wine  spirits  and 
for  rewarehousing  or  for  payment  of  the  tax  on 
any  portion  of  such  wine  spirits  which  remain  not 
used  in  fortifying  pure  sweet  wines." 

Sec.  618.  (a)  That  under  such  regulations  and 
upon  the  execution  of  such  notices,  entries,  bonds, 
and  other  security  as  the  Commissioner,  with  the 
approval  of  the  Secretary,  may  prescribe,  domestic 
wines  subject  to  the  tax  imposed  by  section  611 
may  be  removed  from  the  winery  where  produced, 
free  of  tax,  for  storage  on  other  bonded  premises 
or  from  such  premises  to  other  bonded  premises 
(but  not  more  than  one  such  additional  removal 
shall  be  allowed),  or  for  exportation  from  the 
United  States  or  for  use  as  distilling  material  at  any 
regularly  registered  distillery;  Provided,  however. 
That  the  distiller  using  any  such  wine  as  material 
shall,  subject  to  the  provisions  of  section  3309  of 
the  Revised  Statutes,  as  amended,  be  held  to  pay 
the  tax  on  the  product  of  such  wines  as  will  include 
both  the  alcohoUc  strength  therein  produced  by  fer- 
mentation and  that  obtained  from  the  brandy  or 
wine  spirits  added  to  such  wines  at  the  time  of  for- 
tification. 

(b)  Under  regulations  prescribed  by  the  Commis- 
sioner with  the  approval  of  the  Secretary,  it  shall  be 
lawful  to  produce  grape  wines  on  bonded  winery 
premises  by  the  usual  method,  and  to  transport  and 
use  the  same,  and  like  wines  heretofore  produced 
and  now  stored  on  bonded  winery  premises,  as  dis- 
tiUing  material  for  the  production  of  nonbeverage 
spirits  in  the  production  of  nonalcoholic  wines,  con- 
taining less  than  one-half  of  1  per  centum  of  alco- 


Tax  ov   BEVESAOEg  125 

hol  by  volume,  in  any  fruit  brandy  or  industrial 
distillery;  Provided,  That  all  alcoholic  spirits  so 
obtained  at  any  industrial  distillery  shall  be  de- 
natured, and  all  spirits  so  obtained  at  any  fruit  dis- 
tillery shall  be  removed  and  used  only  for  nonbev- 
erage  purposes  or  for  denaturation. 

Sec.  619.   That  the  collection  of  the  tax  on  im-  imported  wines, 
ported  still  wines,  including  vermuth,  and  sparkhng  collection  of  tax  on 
wines,    including    champagne,    and    on    imported 
^liqueurs,  cordials,  and  similar  compounds,  may  be 
■made  within  the  discretion  of  the  Commissioner, 
I  with  the  approval  of  the  Secretary,  by  assessment 
I  instead  of  by  stamps. 
I      Sec.  620.    That  whoever  evades  or  attempts  to  Penalties  for  evasion 

evade  any  tax  imposed  by  sections  611  to  615,  both  ®^*" 
I  inclusive,  or  any  requirement  of  sections  610  to  621, 
both  inclusive,  or  regulation  issued  pursuant 
thereto,  or  whoever,  otherwise  than  as  provided  in 
such  sections,  recovers  or  attempts  to  recover  any 
spirits  from  domestic  or  imported  wine,  or  who- 
ever rectifies,  mixes,  or  compounds  with  distilled 
spirits  any  domestic  wines,  other  than  in  the  manu- 
facture of  liqueurs,  cordials,  or  similar  compounds, 
shall,  on  conviction,  be  punished  for  each  such  of- 
fense by  a  fine  of  not  exceeding  $5,000,  or  imprison- 
ment for  not  more  than  five  years,  or  both,  and  in 
addition  thereto  by  a  penalty  of  double  the  tax 
evaded,  or  attempted  to  be  evaded,  to  be  assessed 
and  collected  in  the  same  manner  as  taxes  are  as- 
sessed and  collected,  and  all  wines,  spirits,  liqueurs, 
cordials,  or  similar  compounds  as  to  which  such 
violation  occurs  shall  be  forfeited  to  the  United 
States.  But  the  provisions  of  this  section  and  the 
provisions  of  section  3244  of  the  Revised  Statutes, 
as  amended,  relating  to  rectification,  or  other  inter- 
nal-revenue laws  of  the  United  States,  shall  not  be 
held  to  apply  to  or  prohibit  the  mixing  or  blending 


126  RxTEirnEAcT 

of  wines  subject  to  tax  under  the  provisions  of  sec- 
tions 611  to  615,  both  inclusive,  with  each  other  or 
with  other  wines  for  the  sole  purpose  of  perfecting 
such  wines  according  to  commercial  standards; 
Provided,  That  nothing  herein  contained  shall  be 
construed  as  prohibiting  the  use  of  tax-paid  grain 
or  other  ethyl  alcohol  in  the  fortification  of  sweet 
wines  as  defined  in  section  610  of  this  Act  and  sec- 
tion 43  of  the  Act  entitled  "An  Act  to  reduce  the 
revenue  and  equalize  duties  on  imports,  and  for 
other  purposes,"  approved  October  1,  1890,  as 
amended  by  this  Act. 
Apparatus  for  Sec.  621.  That  the  Commissioner,  by  regulations 

protection  of  rercnue    ^q  \yQ  approved  by  the  Secretary,  may  require  the 

use  at  each  fruit  distillery  of  such  spirit  meters, 
and  such  locks  and  seals  to  be  affixed  to  f  ermenters, 
tanks,  or  other  vessels  and  to  such  pipe  connections 
as  may  in  his  judgment  be  necessary  or  expedient, 
and  is  hereby  authorized  to  assign  to  any  such  dis- 
tillery and  to  each  winery  where  wines  are  to  be 
fortified  such  number  of  gangers  or  storekeeper- 
gangers  in  the  capacity  of  gangers  as  may  be  neces- 
sary for  the  proper  supervision  of  the  manufacture 
of  brandy  or  the  making  or  fortifying  of  wines  sub- 
ject to  tax  imposed  by  this  section;  and  the  com- 
pensation of  such  officers  shall  not  exceed  $5  per 
diem  while  so  assigned,  together  with  their  actual 
and  necessary  traveling  expenses,  and  also  a  reason- 
able allowance  for  their  board  bills,  to  be  fixed  by 
the  Comjnissioner,  with  the  approval  of  the  Secre- 
tary, but  not  to  exceed  $2.50  per  diem  for  such 
board  bills. 
Allowance  for  leakage  Sec.  622.  That  the  Commissioncr,  with  the  ap- 
proval of  the  Secretary,  is  hereby  authorized  to 
make  such  allowances  for  unavoidable  loss  of  wines 
while  on  storage  or  during  cellar  treatment  as  in  his 
judgment  may  be  just  and  proper. 


\ 


> 


TaxonBeteraoxs  *  127 

Sec.  623.  That  the  second  paragraph  of  section  See.  3264  u.  s.  R.  s. 
3264  of  the  Revised  Statutes,  as  amended  by  sec-  »°>«°<*««* 
tion  5  of  the  Act  of  March  1,  1879,  and  as  further 
amended  by  the  Act  of  June  22,  1910,  be  amended 
so  as  to  read  as  follows : 

"In  all  surveys  forty-five  gallons  of  mash  or  Surveyi 
beer  brewed  or  fermented  from  grain  shall  repre- 
sent not  less  than  one  bushel  of  grain,  and  seven  gal- 
lons of  mash  or  beer  brewed  or  fermented  from  mo- 
lasses shall  represent  not  less  than  one  gallon  of 
molasses,  except  in  distilleries  operated  on  the  sour- 
mash  principle,  in  which  distilleries  sixty  gallons  of 
beer  brewed  or  fermented  from  grain  shall  repre- 
sent not  less  than  one  bushel  of  grain,  and  except 
that  in  distilleries  where  the  filtration-aeration  pro- 
cess is  used,  with  the  approval  of  the  Commissioner 
of  Internal  Revenue ;  that  is,  where  the  mash  after 
it  leaves  the  mash  tub  is  passed  through  a  filtering 
machine  before  it  is  run  into  the  fermenting  tub, 
and  only  the  filtered  liquor  passes  into  the  ferment- 
ing tub,  there  shall  hereafter  be  no  limitation  upon 
the  number  of  gallons  of  water  which  may  be  used 
in  the  process  of  mashing  or  filtration  for  fermen- 
tation ;  but  the  Commissioner  of  Internal  Revenue, 
with  the  approval  of  the  Secretary  of  the  Treasury, 
in  order  to  protect  the  revenue,  shall  be  authorized 
to  prescribe  by  regulation,  to  be  made  by  him,  such 
character  of  survey  as  he  may  find  suitable  for  dis- 
tilleries using  such  filtration-aeration  process.  The 
provisions  hereof  relating  to  filtration-aeration  pro- 
cess shall  apply  only  to  sweet-mash  distilleries." 

Sec.  624.     That  under  such  regulations  as  the  withdrawal  of  aicohd 
Commissioner,  with  the  approval  of  the  Secretary,  >«<*  «p»"t«  '<"•  ««p»f* 
may  prescribe,  alcohol  or  other  distilled  spirits  of 
a  proof  strength  of  not  less  than  one  hundred  and 
eighty  degrees  intended  for  export  free  of  tax  may 
be  drawn  from  receiving  cisterns  at  any  distillery, 


128 


Retsvue  Act 


Sec.  3525  U.  S.  R.  S. 
amended 


Brandy,  regulations 
for  manufacture 


or  from  storage  tanks  in  any  distillery  warehouse, 
for  transfer  to  tanks  or  tank  ears  for  export  from 
the  United  States,  and  all  provisions  of  existing  law 
relating  to  the  exportation  of  distilled  spirits  not 
inconsistent  herewith  shall  apply  to  spirits  removed 
for  export  under  the  provisions  of  this  Act. 

Sec.  625.  That  section  3255  of  the  Revised 
Statutes  as  amended  by  the  Act  of  June  3,  1896, 
and  as  further  amended  by  the  Act  of  March  2, 
1911,  be  further  amended  so  as  to  read  as  follows: 

"Sec.  3255.  The  Commissioner  of  Internal  Reve- 
nue, with  the  approval  of  the  Secretary  of  the  Treas- 
ury, may  exempt  distillers  of  brandy  made  exclus- 
ively from  apples,  peaches,  grapes,  pears,  pine- 
apples, oranges,  apricots,  berries,  plums,  pawpaws, 
persimmons,  prunes,  figs,  or  cherries  from  any  pro- 
vision of  this  title  relating  to  the  manufacture  of 
spirits,  except  as  to  the  tax  thereon,  when  in  his 
judgment  it  may  seem  expedient  to  do  so;  Pro- 
vided, That  where,  in  the  manufacture  of  wine,  arti- 
ficial sweetening  has  been  used  the  wine  or  the  fruit 
pomace  residuum  may  be  used  in  the  distillation  of 
brandy,  and  such  use  shall  not  prevent  the  Com- 
missioner of  Internal  Revenue,  with  the  approval 
of  the  Secretary  of  the  Treasury,  from  exempting 
such  distiller  from  any  provision  of  this  title  relat- 
ing to  the  manufacture  of  spirits,  except  as  to  the 
tax  thereon,  when  in  his  judgment  it  may  seem  ex- 
pedient to  do  so;  And  provided  further.  That  the 
distillers  mentioned  in  this  section  may  add  to  not 
less  than  five  hundred  gallons  (or  ten  barrels)  of 
grape  cheese  not  more  than  five  hundred  gallons  of 
a  sugar  solution  made  from  cane,  beet,  starch,  or 
corn  sugar,  95  per  centum  pure,  such  solution  to 
have  a  saccharine  strength  of  not  to  exceed  10  per 
centum,  and  may  ferment  the  resultant  mixture  on 


Tax  ok   BxTEiiAasf  129 

a  winery  or  distillery  premises,  and  such  fermented 
product  shall  be  regarded  as  distilling  material." 

Sec.  626.  That  distilled  spirits  known  commer-  Gin  for  export 
eially  as  gin  of  not  less  than  80  per  centum  proof 
may  at  any  time  within  eight  years  after  entry  in 
bond  at  any  distillery  be  bottled  in  bond  at  such 
distillery  for  export  without  the  payment  of  tax, 
under  such  rules  and  regulations  as  the  Commis- 
sioner, with  the  approval  of  the  Secretary,  may  pre- 
scribe. 

Sec.  627.     That  section  3354  of  the  Revised  Sec.  3354  u.  s.  R.  s. 
Statutes  as  amended  by  the  Act  approved  June  18,  amended 
1890,  be,  and  is  hereby,  amended  to  read  as  fol- 
lows : 

"Sec.  3354.  Every  person  who  withdraws  any  Penaliy  for  illegd 
fermented  liquor  from  any  hogshead,  barrel,  keg,  withdrawal*  of 
or  other  vessel  upon  which  the  proper  stamp  has  fe^en**** '»<»"•' 
no*  '.een  affixed  for  the  purpose  of  bottling  the 
same,  or  who  carries  on  or  attempts  to  carry  on  the 
business  of  bottling  fermented  liquor  in  any  brew- 
ery or  other  place  in  which  fermented  liquor  is 
made,  or  upon  any  premises  having  communication 
with  such  brewery,  or  any  warehouse,  shall  be  liable 
to  a  fine  of  $500,  and  the  property  used  in  such  bot- 
tling or  business  shall  be  liable  to  forfeiture;  Pro- 
vided, however.  That  this  section  shall  not  be  con- 
strued to  prevent  the  withdrawal  and  transfer  of 
unfermented,  partially  fermented,  or  fermented 
liquors  from  any  of  the  vats  in  any  brewery  by  way 
of  a  pipe  line  or  other  conduit  to  another  building 
or  place  for  the  sole  purpose  of  bottling  the  same, 
such  pipe  line  or  conduit  to  be  constructed  and 
operated  in  such  manner  and  with  such  cisterns, 
vats,  tanks,  valves,  cocks,  faucets,  and  gauges,  or 
other  utensils  or  apparatus,  either  on  the  premises 
of  the  brewery  or  the  bottling  house,  and  with  such 
changes  of  or  additions  thereto,  and  such  locks, 


180 


Reyen ue   Act 


Payment  of  tax 


Tax  on  near  beer, 
15  per  cent 


seals,  or  other  fastenings,  and  under  such  rules  and 
regulations  as  shall  be  from  time  to  time  prescribed 
by  the  Commissioner  of  Internal  Revenue,  sub- 
ject to  the  approval  of  the  Secretary  of  the  Treas- 
ury, and  all  locks  and  seals  prescribed  shall  be  pro- 
vided by  the  Commissioner  of  Internal  Revenue  at 
the  expense  of  the  United  States ;  Provided  further, 
That  the  tax  imposed  in  section  3339  of  the  Revised 
Statutes  shall  be  paid  on  all  fermented  liquor  re- 
moved from  a  brewery  to  a  bottling  house  by  means 
of  a  pipe  or  conduit,  at  the  time  of  such  removal, 
by  the  cancellation  and  defacement,  by  the  collector 
of  the  district  or  his  deputy,  in  the  presence  of  the 
brewer,  of  the  number  of  stamps  denoting  the  tax 
on  the  fermented  liquor  thus  removed.  The  stamps 
thus  cancelled  and  defaced  shall  be  disposed  of  and 
accounted  for  in  the  manner  directed  by  the  Com- 
missioner of  Internal  Revenue,  with  the  approval 
of  the  Secretary  of  the  Treasury.  And  any  viola- 
tion of  the  rules  and  regulations  hereafter  pre- 
scribed by  the  Commissioner  of  Internal  Revenue, 
with  the  approval  of  the  Secretary  of  the  Treas- 
ury, in  pursuance  of  these  provisions,  shall  be  sub- 
ject to  the  penalties  above  provided  by  this  section. 
Every  owner,  agent,  or  superintendent  of  any  brew- 
ery or  bottling  house  who  removes,  or  connives  at 
the  removal  of,  any  fermented  liquor  through  a  pipe 
line  or  conduit,  without  payment  of  the  tax  thereon, 
or  who  attempts  in  any  manner  to  defraud  the  reve- 
nue as  above,  shall  forfeit  all  the  liquors  made  by 
and  for  him,  and  all  the  vessels,  utensils,  and  ap- 
paratus used  in  making  the  same." 

Sec.  628.  That  there  shall  be  levied,  assessed, 
collected,  and  paid  in  lieu  of  the  taxes  imposed  by 
sections  313  and  315  of  the  Revenue  Act  of  1917 — 

(a)  Upon  all  beverages  derived  wholly  or  in  part 
from  cereals  or  substitutes  therefor,  and  containing 


TAXOirBEVSRAOIf  ISl 

less  than  one-half  of  one  per  centum  of  alcohol,  sold 
by  the  manufacturer,  producer,  or  importer,  in  bot- 
tles or  other  closed  containers,  a  tax  equivalent  to 
15  per  centum  of  the  price  for  which  so  sold;  and 
upon  all  unfermented  grape  juice,  ginger  ale,  root  Tax  on  soft  drink*, 
beer,  sarsaparilla,  pop,  artificial  mineral  waters  '^P^i'cent 
(carbonated  or  not  carbonated),  other  carbonated 
waters  or  beverages,  and  other  soft  drinks,  sold  by 
the  manufacturer,  producer,  or  importer,  in  bottles 
or  other  closed  containers,  a  tax  equivalent  to  10 
per  centimi  of  the  price  for  which  so  sold ;  and 

(b)   Upon  all  natural  mineral  waters  or  table  Tax  on  natural 
waters,  sold  by  the  producer,  bottler,  or  importer  °""^"  ^**" 
thereof,  in  bottles  or  other  closed  containers,  at  over 
10  cents  per  gallon,  a  tax  of  2  cents  per  gallon. 

Sec.  629.  That  each  manufacturer,  producer.  Returns 
bottler,  or  importer  of  any  of  the  articles  enumer- 
ated in  section  628  shall  make  monthly  returns  un- 
der oath  in  duplicate  and  pay  the  taxes  imposed  in 
respect  to  such  articles  by  such  section  to  the  col- 
lector for  the  district  in  which  is  located  the  prin- 
cipal place  of  business,  containing  such  information 
necessary  for  the  assessment  of  the  tax,  and  at  such 
times  and  in  such  manner  as  the  Conmaissioner, 
with  the  approval  of  the  Secretary,  may  by  regu- 
lation prescribe. 

The  tax  shall,  without  assessment  by  the  Com-  P«y»«nt 
missioner  or  notice  from  the  collector,  be  due  and 
payable  to  the  collector  at  the  time  so  fixed  for  filing 
the  return.  If  the  tax  is  not  paid  when  due,  there 
shall  be  added  as  part  of  the  tax  a  penalty  of  S 
per  centum,  together  with  interest  at  the  rate  of  1 
per  centum  for  each  full  month,  from  the  time  when 
the  tax  became  due. 

Sec.  630.   That  on  and  after  May  1,  1919,  there  Tax  on  ice  cream 
shall  be  levied,  assessed,  collected,  and  paid  a  tax  *"**»****• 
of  1  cent  for  each  10  cents  or  fraction  thereof  of  the 


1**  RxTxvns   Act 

amount  paid  to  any  person  conducting  a  soda  foun- 
tain, ice-cream  parlor,  or  other  similar  place  of  busi- 
ness, for  drinks  commonly  known  as  soft  drinks, 
compounded  or  mixed  at  such  place  of  business,  or 
for  ice  cream,  ice-cream  sodas,  sundaes,  or  other 
similar  articles  of  food  or  drink,  when  any  of  the 
above  are  sold  on  or  after  such  date  for  consump- 
tion in  or  in  proximity  to  such  place  of  business. 
Such  tax  shall  be  paid  by  the  piu'chaser  to  the  ven- 
dor at  the  time  of  the  sale  and  shall  be  collected,  re- 
turned, and  paid  to  the  United  States  by  such  ven- 
dor in  the  same  manner  as  provided  in  section  502. 


TITLE  VII. 

Tax  on  Cigars,  Tobacco,  and  Manufac- 
tures Thereof 

Sec.  700.  (a)  That  upon  cigars  and  cigarettes  Taxei  on  dgw  and 
manufactured  in  or  imported  into  the  United  cigarettet 
States,  and  hereafter  sold  by  the  manufacturer  or 
importer,  or  removed  for  consumption  or  sale,  there 
shall  be  levied,  collected,  and  paid  under  the  pro- 
visions of  existing  law,  in  heu  of  the  internal-reve- 
nue taxes  now  imposed  thereon  by  law,  the  follow- 
ing taxes,  to  be  paid  by  the  manufacturer  or  im- 
porter thereof — 

On  cigars  of  all  descriptions  made  of  tobacco,  or  Ggars  weighing  not 
any  substitute  therefor,  and  weighing  not  more  than  «▼«'  3  ibt.  per  m 
three  pounds  per  thousand,  $1.50  per  thousand; 

On  cigars  made  of  tobacco,  or  any  substitute  Ggar«  weighing  oyer 
therefor,  and  weighing  more  than  three  pounds  per  ^  lbs.  per  M 
thousand,  if  manufactured  or  imported  to  retail  at 
not  more  than  5  cents  each,  $4  per  thousand; 

If  manufactured  or  imported  to  retail  at  more 
than  5  cents  each  and  not  more  than  8  cents  each, 
$6  per  thousand; 

If  manufactured  or  imported  to  retail  at  more 
than  8  cents  each  and  not  more  than  15  cents  each, 
$9  per  thousand; 

If  manufactured  or  imported  to  retail  at  more 
than  15  cents  each  and  not  more  than  20  cents  each, 
$12  per  thousand; 

If  manufactiu'cd  or  imported  to  retail  at  more 
than  20  cents  each,  $15  per  thousand; 

133 


184 


Revekue   Act 


Cigarettes  weiglung 
not  over  3  lbs.  per  M 


Over  3  lbs.  per  M 


Retul  price 
defined 


Labels  on  containers 


Ggarette  packages, 
regulaUons  goyerning 


On  cigarettes  made  of  tobacco,  or  any  substitute 
therefor,  and  weighing  not  more  than  three  pounds 
per  thousand,  $3  per  thousand; 

Weighing  more  than  three  pounds  per  thousand, 
$7.20  per  thousand. 

(b)  Whenever  in  this  section  reference  is  made 
to  cigars  manufactured  or  imported  to  retail  at  not 
over  a  certain  price  each,  then  in  determining  the 
tax  to  be  paid  regard  shall  be  had  to  the  ordinary 
retail  price  of  a  single  cigar. 

(c)  The  Commissioner  may,  by  regulation,  re- 
quire the  manufacturer  or  importer  to  affix  to  each 
box,  package,  or  container  a  conspicuous  label  in- 
dicating the  clause  of  this  section  under  which  the 
cigars  therein  contained  have  been  tax-paid,  which 
must  correspond  with  the  tax- paid  stamp  on  such 
box  or  container. 

(d)  Every  manufacturer  of  cigarettes  (includ- 
ing small  cigars  weighing  not  more  than  three 
pounds  per  thousand)  shall  put  up  all  the  cigarettes 
and  such  small  cigars  that  he  manufactures  or  has 
manufactured  for  him,  and  sells  or  removes  for  con- 
sumption or  sale,  in  packages  or  parcels  containing 
five,  eight,  ten,  twelve,  fifteen,  sixteen,  twenty, 
twenty-four,  forty,  fifty,  eighty,  or  one  hundred 
cigarettes  each,  and  shall  securely  affix  to  each  of 
such  packages  or  parcels  a  suitable  stamp  denoting 
the  tax  thereon  and  shall  properly  cancel  the  same 
prior  to  such  sale  or  removal  for  consumption  or 
sale  under  such  regulations  as  the  Commissioner, 
with  the  approval  of  the  Secretary,  shall  prescribe; 
and  all  cigarettes  imported  from  a  foreign  country 
shall  be  packed,  stamped,  and  the  stamps  cancelled 
in  a  like  manner,  in  addition  to  the  import  stamp 
indicating  inspection  of  the  customhouse  before 
they  are  withdrawn  therefrom. 


CioABB  AND  Tobacco  135 


Sec.  701.  (a)  That  upon  all  tobacco  and  snuflf  Tobacco  and  muff, 
manufactured  in  or  imported  into  the  United  *"•" 
States,  and  hereafter  sold  by  the  manufacturer  or 
importer,  or  removed  for  consumption  or  sale,  there 
shall  be  levied,  collected,  and  paid,  in  lieu  of  the 
internal-revenue  taxes  now  imposed  thereon  by  law, 
a  tax  of  18  cents  per  pound,  to  be  paid  by  the 
manufacturer  or  importer  thereof. 

(b)  Section  3362  of  the  Revised  Statutes,  as 
amended,  is  hereby  amended  to  read  as  follows: 

"Sec.  3362.   All  manufactured  tobacco  shall  be  Sec.  3362  u.  s.  R.  s. 
put  up  and  prepared  by  the  manufacturer  for  sale,  «°»«n<*e<' 
or  removal  for  sale  or  consimaption,  in  packages  of 
the  following  description  and  in  no  other  manner: 

"All  smoking  tobacco,  Snuif,  fine-cut  chewing  to-   Tobacco  packages, 

bacco,  all  cut  and  granulated  tobacco,  aU  shorts,  the  '^^^^^^^^^^  ««^*™^"« 
refuse  of  fine-cut  chewing,  which  has  passed  through 
a  riddle  of  thirty-six  meshes  to  the  square  inch,  and 
all  refuse  scraps,  cUppings,  cuttings,  and  sweepings 
of  tobacco,  and  all  other  kinds  of  tobacco  not  other- 
wise provided  for,  in  packages  containing  one- 
eighth  of  an  ounce,  three-eighths  of  an  ounce,  and 
further  packages  with  a  difference  between  each 
package  and  the  one  next  smaller  of  one-eighth  of 
an  ounce  up  to  and  including  two  ounces,  and  fur- 
ther packages  with  a  difference  between  each  pack- 
age and  the  one  next  smaller  of  one-fourth  of  an 
ounce  up  to  and  including  four  ounces,  and  pack- 
ages of  five  ounces,  six  ounces,  seven  ounces,  eight 
ounces,  ten  ounces,  twelve  ounces,  fourteen  ounces, 
and  sixteen  ounces;  Provided,  That  snuff  may,  at 
the  option  of  the  manufacturer,  be  put  up  in  blad- 
ders and  in  jars  containing  not  exceeding  twenty 
pounds. 

"All  cavendish,  plug,  and  twist  tobacco,  in 
wooden  packages  not  exceeding  two  himdred 
pounds  net  weight. 


136 


RxYEKUB  Act 


Information  on 
packages 


Export  packages 
excepted 


Sales  in  bulk  without 
tax 


Materials  used  in 
making  containers 


Floor  tax  on  products 
held  for  sale 


Ggarette  paper, 
tax  on 


"And  every  such  wooden  package  shall  have 
printed  or  marked  thereon  the  manufacturer's  name 
and  place  of  manufacture,  the  registered  number 
of  the  manufactory,  and  the  gross  weight,  the  tare, 
and  the  net  weight  of  the  tobacco  in  each  package; 
Provided,  That  these  limitations  and  descriptions 
of  packages  shall  not  apply  to  tobacco  and  snuff 
transported  in  bond  for  exportation  and  actually 
exported;  And  provided  further,  That  perique  to- 
bacco, snuff  flour,  fine-cut  shorts,  the  refuse  of  fine- 
cut  chewing  tobacco,  refuse  scraps,  chppings,  cut- 
tings, and  sweepings  of  tobacco,  may  be  sold  in  bulk 
as  material,  and  without  the  payment  of  tax,  by  one 
manufacturer  directly  to  another  manufacturer,  or 
for  export,  under  such  restrictions,  rules,  and  regu- 
lations as  the  Commissioner  of  Internal  Revenue 
may  prescribe;  And  provided  further.  That  wood, 
metal,  paper,  or  other  materials  may  be  used  sepa- 
rately or  in  combination  for  packing  tobacco,  snuff, 
and  cigars,  under  such  regulations  as  the  Commis- 
sioner of  Internal  Revenue  may  estabhsh." 

Sec.  702.  That  upon  all  the  articles  enumer- 
ated in  section  700  or  701,  which  were  manufactured 
or  imported,  and  removed  from  factory  or  custom- 
house on  or  prior  to  the  date  of  the  passage  of  this 
Act,  and  upon  which  the  tax  imposed  by  existing 
law  has  been  paid,  and  which  are,  on  the  day  after 
the  passage  of  this  Act,  held  by  any  person  and  in- 
tended for  sale,  there  shall  be  levied,  assessed,  col- 
lected, and  paid  a  floor  tax  equal  to  the  difference 
between  (a)  the  tax  imposed  by  this  Act  upon  such 
articles  according  to  the  class  in  which  they  are 
placed  by  this  title,  and  (b)  the  tax  imposed  upon 
such  articles  by  existing  law  other  than  section  403 
of  the  Revenue  Act  of  1917. 

Sec.  703.  That  there  shall  be  levied,  collected, 
and  paid,  in  Ueu  of  the  taxes  imposed  by  section  404 


CZOABB    AlTD    TOBACOO  137 

of  the  Revenue  Act  of  1917,  upon  cigarette  paper 
made  up  into  packages,  books,  sets,  or  tubes,  made 
up  in  or  imported  into  the  United  States  and  here- 
after sold  by  the  manufacturer  or  importer  to  any 
person  (other  than  to  a  manufacturer  of  cigarettes 
for  use  by  him  in  the  manufacture  of  cigarettes) 
the  following  taxes,  to  be  paid  by  the  manufacturer 
or  importer:  On  each  package,  book,  or  set,  con- 
taining more  than  twenty-five  but  not  more  than 
fifty  papers,  one-half  cent;  containing  more  than 
fifty  but  not  more  than  one  hundred  papers,  1  cent ; 
containing  more  than  one  hundred  papers,  one-half 
cent  for  each  fifty  papers  or  fractional  part  thereof; 
and  upon  tubes,  1  cent  for  each  fifty  tubes  or  frac- 
tional part  thereof. 

Every  manufacturer  of  cigarettes  purchasing  any  Records  and  bond 
cigarette  paper  made  up  into  tubes  (a)  shall  give  required  of  dgareito 
bond  in  an  amount  and  with  sureties  satisfactory  °'*°  ^^^^ 
to  the  Commissioner  that  he  will  use  such  tubes  in 
the  manufacture  of  cigarettes  or  pay  thereon  a  tax 
equivalent  to  the  tax  imposed  by  this  section,  and 
(b)  shall  keep  such  records  and  render  under  oath 
such  returns  as  the  Commissioner  finds  necessary 
to  show  the  disposition  of  all  tubes  purchased  or 
imported  by  such  manufacturer  of  cigarettes. 

Sec.  704.    That  section  35  of  the  Act  entitled  Sec.  35,  Aci  of  Aug.  5, 
"An  Act  to  provide  revenue,  equalize  duties  and  en-  ^^^*  repealed 
courage  the  industries  of  the  United  States,  and  for 
other  purposes,"  approved  August  5,  1909,  be,  and 
is  hereby,  repealed,  to  take  effect  April  1,  1919. 

That  section  3360  of  the  Revised  Statutes  be,  and  See.  3360,  u.  s.  R.  s. 
is  hereby,  amended  to  read  as  follows :  amended 

"Sec.  3360.   (a)    Every  dealer  in  leaf  tobacco  Statement  of  dealers 
shall  file  with  the  collector  of  the  district  in  which  ">  *«•'  tobacco 
his  business  is  carried  on,  a  statement  in  duphcate, 
subscribed  under  oath,  setting  forth  the  place,  and, 
if  in  a  city,  the  street  and  number  of  the?  street, 


188 


Reyekus   Act 


Bond 


Number 


Inventory  report 


Records 


where  his  business  is  to  be  carried  on,  and  the  exact 
location  of  each  place  where  leaf  tobacco  is  held  by 
him  on  storage,  and,  whenever  he  adds  to  or  discon- 
tinues any  of  his  leaf  tobacco  storage  places,  he  shall 
give  immediate  notice  to  the  collector  of  the  district 
in  which  he  is  registered. 

"Every  such  dealer  shall  give  a  bond  with  surety, 
satisfactory  to,  and  to  be  approved  by,  the  collector 
of  the  district,  in  such  penal  sum  as  the  collector 
may  require,  not  less  than  $500;  and  a  new  bond 
may  be  required  in  the  discretion  of  the  collector  or 
under  instructions  of  the  Commissioner. 

"Every  such  dealer  shall  be  assigned  a  nimiber  by 
the  collector  of  the  district,  which  number  shall  ap- 
pear in  every  inventory,  invoice  and  report  ren- 
dered by  the  dealer,  who  shall  also  obtain  certifi- 
cates from  the  collector  of  the  district  setting  forth 
the  place  where  his  business  is  carried  on  and  the 
places  designated  by  the  dealer  as  the  places  of 
storage  of  his  tobacco,  which  certificates  shall  be 
posted  conspicuously  within  the  dealer's  registered 
place  of  business,  and  within  each  designated  place 
of  storage. 

"(b)  Every  dealer  in  leaf  tobacco  shall  make  and 
deUver  to  the  collector  of  the  district  a  true  inven- 
tory of  the  quantity  of  the  different  kinds  of  to- 
bacco held  or  owned,  and  where  stored  by  him,  on 
the  first  day  of  January  of  each  year,  or  at  the  time 
of  commencing  and  at  the  time  of  concluding  busi- 
ness, if  before  or  after  the  first  day  of  January,  such 
inventory  to  be  made  under  oath  and  rendered  in 
such  form  as  may  be  prescribed  by  the  Commis- 
sioner. 

"Every  dealer  in  leaf  tobacco  shall  render  such 
invoices  and  keep  such  records  as  shall  be  prescribed 
by  the  Commissioner,  and  shall  enter  therein,  day 
by  day,  and  upon  the  same  day  on  which  the  cir- 


CzoABs  AND  Tobacco  1S9 

cumstance,  thing  or  act  to  be  recorded  is  done  or 
occurs,  an  accurate  account  of  the  number  of  hogs- 
heads, tierces,  cases  and  bales,  and  quantity  of  leaf 
tobacco  contained  therein,  purchased  or  received  by 
him,  on  assignment,  consignment,  for  storage,  by 
transfer  or  otherwise,  and  of  whom  purchased  or 
received,  and  the  number  of  hogsheads,  tierces, 
cases  and  bales,  and  the  quantity  of  leaf  tobacco 
contained  therein,  sold  by  him,  with  the  name  and 
residence  in  each  instance  of  the  person  to  whom 
sold,  and  if  shipped,  to  whom  shipped,  and  to  what 
district;  such  records  shall  be  kept  at  his  place  of 
business  at  all  times  and  preserved  for  a  period  of 
two  years,  and  the  same  shall  be  open  at  all  hours 
for  the  inspection  of  any  internal-revenue  officer 
or  agent. 

"Every  dealer  in  leaf  tobacco  on  or  before  the  MontHy  reports 
tenth  day  of  each  month,  shall  furnish  to  the  col- 
lector of  the  district  a  true  and  complete  report  of 
all  purchases,  receipts,  sales  and  shipments  of  leaf 
tobacco  made  by  him  during  the  month  next  pre- 
ceding, which  report  shall  be  verified  and  rendered 
in  such  form  as  the  Commissioner,  with  the  ap- 
proval of  the  Secretary,  shall  prescribe. 

"(c)  Sales  or  shipments  of  leaf  tobacco  by  a  Sales  or  shipments, 
dealer  in  leaf  tobacco  shall  be  in  quantities  of  not  regulations  concerning 
less  than  a  hogshead,  tierce,  case,  or  bale,  except 
loose  leaf  tobacco  comprising  the  breaks  on  ware- 
house floors,  and  except  to  a  duly  registered  manu- 
facturer of  cigars  for  use  in  his  own  manufactory 
exclusively. 

"Dealers  in  leaf  tobacco  shall  make  shipments  of 
leaf  tobacco  only  to  other  dealers  in  leaf  tobacco, 
to  registered  manufacturers  of  tobacco,  snuff,  ci- 
gars or  cigarettes,  or  for  export. 

"(d)    Upon  all  leaf  tobacco  sold,  removed  or  Penai  tax  for  violation 
shipped  by  any  dealer  in  leaf  tobacco  in  violation  of  of  above  requirements 


140 


Rbtxitus   Act 


Penalties 


Farmer  not  a 
"dealer'' 


(< 


(( 


the  provisions  of  subdivision  (c),  or  in  respect  to 
vi^hich  no  report  has  been  made  by  such  dealer  in 
accordance  with  the  provisions  of  subdivision  (b), 
there  shall  be  levied,  assessed,  collected  and  paid  a 
tax  equal  to  the  tax  then  in  force  upon  manufac- 
tured tobacco,  such  tax  to  be  assessed  and  collected 
in  the  same  manner  as  the  tax  on  manufactured 
tobacco. 

(e)  Every  dealer  in  leaf  tobacco 
(1)  who  neglects  or  refuses  to  furnish  the  state- 
ment, to  give  bond,  to  keep  books,  to  file  inventory 
or  to  render  the  invoices,  returns  or  reports  required 
by  the  Commissioner,  or  to  notify  the  collector  of 
the  district  of  additions  to  his  places  of  storage ;  or 

"  (2)  who  ships  or  delivers  leaf  tobacco,  except  as 
herein  provided;  or 

"(3)  who  fraudulently  omits  to  account  for  to- 
bacco purchased,  received,  sold,  or  shipped; 
shall  be  fined  not  less  than  $100  or  more  than  $500, 
or  imprisoned  not  more  than  one  year,  or  both. 

"(f)  For  the  purposes  of  this  section  a  farmer  or 
grower  of  tobacco  shall  not  be  regarded  as  a  dealer 
in  leaf  tobacco  in  respect  to  the  leaf  tobacco  pro- 
duced by  him." 


TITLE  VIII. 

Tax  On  Admissions  and  Dues 

Sec.  800.    (a)    That  from  and  after  April  1,  Admissions  tax 
1919,  there  shall  be  levied,  assessed,  collected,  and 
paid,  in  lieu  of  the  taxes  imposed  by  section  700  of 
the  Revenue  Act  of  1917 — 

(1)  A  tax  of  1  cent  for  each  10  cents  or  fraction  R^e 
thereof  of  the  amount  paid  for  admission  to  any 
place  on  or  after  such  date,  including  admission  by 
season  ticket  or  subscription,  to  be  paid  by  the  per- 
son paying  for  such  admission; 

(2)  In  the  case  of  persons  (except  bona  fide  em- 
ployees, municipal  officers  on  official  business,  per- 
sons in  the  mihtary  or  naval  forces  of  the  United 
States  when  in  uniform,  and  children  under  twelve 

years  of  age)  admitted  free  or  at  reduced  rates  to  Free  or  reduced  rate 
any  place  at  a  time  when  and  under  circumstances  *<*°"»«»»n« 
under  which  an  admission  charge  is  made  to  other 
persons,  a  tax  of  1  cent  for  each  10  cents  or  frac- 
tion thereof  of  the  price  so  charged  to  such  other 
persons  for  the  same  or  similar  accommodations,  to 
be  paid  by  the  person  so  admitted; 

(8)   Upon  tickets  or  cards  of  admission  to  the-  Tickets  sold  ai  ad- 
aters,  operas,  and  other  places  of  amusement,  sold  ^^we  iHmVi  ticket 
at  news  stands,  hotels,  and  places  other  than  the  office 
ticket  offices  of  such  theaters,  operas,  or  other  places 
of  amusement,  at  not  to  exceed  50  cents  in  excess 
of  the  simi  of  the  established  price  therefor  at  such 
ticket  offices  plus  the  amount  of  any  tax  imposed 
under  paragraph  (1),  a  tax  equivalent  to  5  per 
centum  of  the  amount  of  such  excess;  and  if  sold 

141 


148 


Retknux   Act 


Hckets  sold  at 
adyanced  prices  by 
employees 


Permanent  use  of 
boxes  or  seats 


Cabarets,  roof- 
gardens,  etc. 


for  more  than  50  cents  in  excess  of  the  sum  of  such 
established  price  plus  the  amount  of  any  tax  im- 
posed under  paragraph  (1),  a  tax  equivalent  to 
50  per  centimi  of  the  whole  amount  of  such  excess, 
such  taxes  to  be  returned  and  paid,  in  the  manner 
provided  in  section  903,  by  the  person  selling  such 
tickets ; 

(4)  A  tax  equivalent  to  50  per  centum  of  the 
amount  for  which  the  proprietors,  managers,  or  em- 
ployees of  any  opera  house,  theater,  or  other  place 
of  amusement  sell  or  dispose  of  tickets  or  cards  of 
admission  in  excess  of  the  regular  or  established 
price  or  charge  therefor,  such  tax  to  be  returned  and 
paid,  in  the  manner  provided  in  section  903,  by  the 
person  selling  such  tickets; 

(5)  In  the  case  of  persons  having  the  perma- 
nent use  of  boxes  or  seats  in  an  opera  house  or  any 
place  of  amusement  or  a  lease  for  the  use  of  such 
box  or  seat  in  such  opera  house  or  place  of  amuse- 
ment (in  lieu  of  the  tax  imposed  by  paragraph  ( 1 ) ) , 
a  tax  equivalent  to  10  per  centum  of  the  amount 
for  which  a  similar  box  or  seat  is  sold  for  each  per- 
formance or  exhibition  at  which  the  box  or  seat  is 
used  or  reserved  by  or  for  the  lessee  or  holder,  such 
tax  to  be  paid  by  the  lessee  or  holder;  and 

(6)  A  tax  of  1%  cents  for  each  10  cents  or  frac- 
tion thereof  of  the  amount  paid  for  admission  to  any 
public  performance  for  profit  at  any  roof  garden, 
cabaret,  or  other  similar  entertainment,  to  which 
the  charge  for  admission  is  wholly  or  in  part  in- 
cluded in  the  price  paid  for  refreshment,  service, 
or  merchandise;  the  amount  paid  for  such  admis- 
sion to  be  deemed  to  be  20  per  centum  of  the  amoimt 
paid  for  refreshment,  service,  and  merchandise; 
such  tax  to  be  paid  by  the  person  paying  for  such 
refreshment,  service,  or  merchandise. 


Tax   on   Admissions   akd   Duks 


14S 


(b)  No  tax  shall  be  levied  under  this  title  in  re-  Exemptions 
spect  to  any  admissions  all  the  proceeds  of  which 

inure  exclusively  to  the  benefit  of  religious,  educa- 
tional, or  charitable  institutions,  societies,  or  organ- 
izations, societies  for  the  prevention  of  cruelty  to 
children  or  animals,  or  exclusively  to  the  benefit  of 
organizations  conducted  for  the  sole  purpose  of 
maintaining  symphony  orchestras  and  receiving 
substantial  support  from  voluntary  contributions, 
none  of  the  profits  of  which  are  distributed  to  mem- 
bers of  such  organizations,  or  exclusively  to  the 
benefit  of  persons  in  the  military  or  naval  forces  of 
the  United  States,  or  admissions  to  agricultural 
fairs  none  of  the  profits  of  which  are  distributed  to 
stockholders  or  members  of  the  association  conduct- 
ing the  same. 

(c)  The  term  '^admission"  as  used  in  this  title  in-  Admission 
eludes  seats  and  tables,  reserved  or  otherwise,  and  defined 
other   similar   acconmiodations,    and   the   charges 
made  therefor. 

(d)  The  price  (exclusive  of  the  tax  to  be  paid  by  information  to  be 
the  person  paying  for  admission)  at  which  every  printed  on  ticket 
admission  ticket  or  card  is  sold  shall  be  conspicu- 
ously and  indelibly  printed,  stamped,  or  written  on 

the  face  or  back  thereof,  together  with  the  name  of 
the  vendor  if  sold  other  than  at  the  ticket  office  of 
the  theater,  opera,  or  other  place  of  amusement. 
Whoever  sells  an  admission  ticket  or  card  on  which 
the  name  of  the  vendor  and  price  is  not  so  printed, 
stamped,  or  written,  or  at  a  price  in  excess  of  the 
price  so  printed,  stamped,  or  written  thereon,  is 
guilty  of  a  misdemeanor,  and  upon  conviction 
thereof  shall  be  fined  not  more  than  $100. 

Sec.  801.    That  from  and  after  April  1,  1919,  Dues  and  member, 
there  shall  be  levied,  assessed,  collected,  and  paid,  in  »*"p  '««» *" 
lieu  of  the  taxes  imposed  by  section  701  of  the  Reve- 
nue Act  of  1917,  a  tax  equivalent  to  10  per  centum 


144 


Retexux  Act 


Inidadon  fee« 


Exempdons 


Life  memberships 


CoQection  and 
payment  of  taxes 


See  page  103 


of  any  amount  paid  on  or  after  such  date,  for  any 
period  after  such  date,  (a)  as  dues  or  membership 
fees  (where  the  dues  or  fees  of  an  active  resident 
annual  member  are  in  excess  of  $10  per  year)  to 
any  social,  athletic,  or  sporting  club  or  organization; 
or  (b)  as  initiation  fees  to  such  a  club  or  organiza- 
tion, if  such  fees  amount  to  more  than  $10,  or  if  the 
dues  or  membership  fees  (not  including  initiation 
fees)  of  an  active  resident  annual  member  are  in 
excess  of  $10  per  year;  such  taxes  to  be  paid  by  the 
persons  paying  such  dues  or  fees;  Provided,  That 
there  shall  be  exempted  from  the  provisions  of  this 
section  all  amounts  paid  as  dues  or  fees  to  a  fra- 
ternal society,  order,  or  association,  operating  un- 
der the  lodge  system.  In  the  case  of  life  member- 
ships a  life  member  shall  pay  annually,  at  the  time 
for  the  payment  of  dues  by  active  resident  annual 
members,  a  tax  equivaleiii,  to  the  tax  upon  the 
amount  paid  by  such  a  member,  but  shall  pay  no 
tax  upon  the  amount  paid  for  life  membership. 

Sec.  602,  That  every  person  (a)  receiving  any 
payments  for  such  admission,  dues,  or  fees  shall  col- 
lect the  amount  of  the  tax  imposed  by  section  800 
or  801  from  the  person  making  such  payments,  or 
(b)  admitting  any  person  free  to  any  place  for  ad- 
mission to  which  a  charge  is  made,  shall  collect  the 
amount  of  the  tax  imposed  by  section  800  from  the 
person  so  admitted.  Every  club  or  organization 
having  Ufe  members,  shall  collect  from  such  mem- 
bers the  amount  of  the  tax  imposed  by  section  801. 
In  all  the  above  cases  returns  and  payments  of  the 
amount  so  collected  shall  be  made  at  the  same  time 
and  in  the  same  manner  as  provided  in  section  502. 


manu- 


TITLE  IX. 
Excise  Taxes 

Sec.  900.    That  there  shall  be  levied,  assessed,  Excise  taxes 
collected,  and  paid  upon  the  following  articles  sold 
or  leased  by  the  manufacturer,  producer,  or  im-  On  sales  b 
porter,  a  tax  equivalent  to  the  following  percentages  faciurer  or  importer 
of  the  price  for  which  so  sold  or  leased — 

(1)  Automobile  trucks  and  automobile  wagons.  Autotrucks 
(including  tires,  inner  tubes,  parts,  and  accessories  and  accessories 
therefor,  sold  on  or  in  connection  therewith  or  with 

the  sale  thereof) ,  3  per  centum; 

(2)  Other  automobiles  and  motorcycles,  (includ-  Autos  and  motor- 
ing tires,  inner  tubes,  parts,  and  accessories  there-  ^^^^*  *"**  accessories 
for,  sold  on  or  in  connection  therewith  or  with  the 

sale  thereof),  except  tractors,  5  per  centum; 

(3)  Tires,  inner  tubes,  parts,  or  accessories,  for  Accessories 
any  of  the  articles  enumerated  In  subdivision  (1), 

or  (2),  sold  to  any  person  other  than  a  manufac- 
turer or  producer  of  any  of  the  articles  enumerated 
in  subdivision  (1),  or  (2),  5  per  centum; 

(4)  Pianos,  organs    (other  than  pipe  organs).  Musical  instruments 
piano  players,  graphophones,  phonographs,  talking 
machines,  music  boxes,  and  records  used  in  connec- 
tion with  any  musical  instrument,  piano  player, 
graphophone,  phonogi^aph,  or  talking  machine,  5 

per  centum; 

( 5 )  Tennis  rackets,  nets,  racket  covers  and  presses.  Sporting  goods 
skates,  snowshoes,  skis,  toboggans,  canoe  paddles 

and  cushions,  polo  mallets,  baseball  bats,  gloves, 
masks,  protectors,  shoes  and  uniforms,  football  hel- 
mets, harness  and  goals,  basket-ball  goals  and  uni- 

145 


146 


Re VEKUK   Act 


Chewing  gum 
Cameras 

Photo  films 

Candy 

Hrearms  and 
ammunition 


Hunting  knives, 
daggers,  etc. 


Electric  fans 
Thermos  bottles 


Vipes  and  cigarette 
holders 


Slot  maclunes 


forms,  golf  bags  and  clubs,  lacrosse  sticks,  balls  of 
all  kinds,  including  baseballs,  footballs,  tennis,  golf, 
lacrosse,  billiard  and  pool  balls,  fishing  rods  and 
reels,  billiard  and  pool  tables,  chess  and  checker 
boards  and  pieces,  dice,  games  and  parts  of  games 
(except  playing  cards  and  children's  toys  and 
games),  and  all  similar  articles  commonly  or  com- 
mercially known  as  sporting  goods,  10  per  centimi; 

(6)  Chewing  gum  or  substitutes  therefor,  3  per 
centum ; 

(7)  Cameras,  weighing  not  more  than  100 
pounds,  10  per  centum; 

(8)  Photographic  films  and  plates,  other  than 
moving-picture  films,  5  per  centum; 

(9)  Candy,  5  per  centum; 

(10)  Firearms,  shells,  and  cartridges,  except 
those  sold  for  the  use  of  the  United  States,  any 
State,  Territory,  or  possession  of  the  United  States, 
any  political  subdivision  thereof,  the  District  of 
Columbia,  or  any  foreign  country  while  engaged 
against  the  German  Government  in  the  present 
war,  10  per  centum; 

(11)  Hunting  and  bowie  knives,  10  per  centum; 

(12)  Dirk  knives,  daggers,  sword  canes,  stillet- 
tos,  and  brass  or  metallic  knuckles,  100  per  centum; 

(13)  Portable  electric  fan,  5  per  centum; 

(14)  Thermos  and  thermostatic  bottles,  carafes, 
jugs,  or  other  thermostatic  containers,  5  per  cen- 
tum; 

(15)  Cigar  or  cigarette  holders  and  pipes,  com- 
posed wholly  or  in  part  of  meerschaum  or  amber, 
humidors,  and  smoking  stands,  10  per  centum; 

(16)  Automatic  slot-device  vending  machines,  5 
per  centum,  and  automatic  slot-device  weighing  ma- 
chines, 10  per  centum;  if  the  manufacturer,  pro- 
ducer, or  importer  of  any  such  machine  operates  it 
for  profit,  he  shall  pay  a  tax  in  respect  to  each  such 


leasure 
boats,  etc 


Excise  Taxbi  147 

machine  put  into  operation  equivalent  to  5  per  cen- 
tum of  its  fair  market  value  in  the  case  of  a  vending 
machine,  and  10  per  centum  of  its  fair  market  value 
in  the  case  of  a  weighing  machine ; 

(17)  Liveries  and  livery  boots  and  hats,  10  per  ^1^,^^^, 
centum; 

(18)  Hunting  and  shooting  garments  and  rid-  Sporting  habit* 
ing  habits,  10  per  centum;  • 

(19)  Articles  made  of  fur  on  the  hide  or  pelt,  or  Fur  product* 
of  which  any  such  fur  is  the  component  material  of 

chief  value,  10  per  centum; 

(20)  Yachts  and  motor  boats  not  designed  for  ]'^fl'_'*'f^'* 
trade,  fishing,  or  national  defense;  and  pleasure 
boats  and  pleasure  canoes  if  sold  for  more  than  $15, 

10  per  centum; 

(21)  Toilet  soaps  and  toilet  soap  powders,  3  per 
centum. 

If  any  manufacturer,  producer,  or  importer  of  Toilet  soaps 
any  of  the  articles  enumerated  in  this  section  cus- 
tomarily seUs  such  articles  both  at  wholesale  and  at  J[t?h  who^^^^^^^^ 
retail,  the  tax  in  the  case  of  any  article  sold  by  him  a„d  retail 
at  retail  shall  be  computed  on  the  price  for  which 
like  articles  are  sold  by  him  at  wholesale. 

The  taxes  imposed  by  this  section  shall,  in  the 
case  of  any  article  in  respect  to  which  a  correspond- 
ing tax  is  imposed  by  section  600  of  the  Revenue 
Act  of  1917,  be  in  lieu  of  such  tax. 

Sec.  901.  That  if  any  person  manufactures,  pro-  saies,  leases  or 
duces  or  imports  any  article  enumerated  in  section  licenses  taxed  on 
900,  or  leases  or  licenses  for  exhibition  any  positive  ****"  ®'  ^^^  '°*'*'®' 
motion-picture  film  containing  a  picture  ready  for  **"^* 
projection,  and,  whether  through  any  agreement, 
arrangement,  or  understanding,  or  otherwise,  sells, 
leases  or  licenses  such  article  at  less  than  the  fair 
market  price  obtainable  therefor,  either  (a)  in  such 
manner  as  directly  or  indirectly  to  benefit  such  per- 


148 


RxvEifrnK  Act 


Works  of  art  and 
antiques 


Exception 


Monthly  returns 


Collection  and  pay- 
ment of  tax 


Luxury  taxes  on  goods 
sold  by  dealers  for 
consumption 


son  or  any  person  directly  or  indirectly  interested 
in  the  business  of  such  person,  or  (b)  with  intent  to 
cause  such  benefit,  the  amount  for  which  such  arti- 
cle is  sold,  leased  or  licensed  shall  be  taken  to  be  the 
amount  which  would  have  been  received  from  the 
sale,  lease  or  Ucense  of  such  article  if  sold,  leased 
or  licensed  at  the  fair  market  price. 

Sec.  902.  That  there  shall  be  levied,  assessed, 
collected,  and  paid  upon  sculpture,  paintings,  stat- 
uary, art  porcelains,  and  bronzes,  sold  by  any  person 
other  than  the  artist,  a  tax  equivalent  to  10  per 
centum  of  the  price  for  which  so  sold.  This  section 
shall  not  apply  to  the  sale  of  any  such  article  to  an 
educational  institution  or  pubUc  art  museum. 

Sec.  903.  That  every  person  Uable  for  any  tax 
imposed  by  section  900,  902,  or  906,  shall  make 
monthly  returns  under  oath  in  duplicate  and  pay 
the  taxes  imposed  by  such  sections  to  the  collector 
for  the  district  in  which  is  located  the  principal  place 
of  business.  Such  returns  shall  contain  such  infor- 
mation and  be  made  at  such  times  and  in  such  man- 
ner as  the  Commissioner,  with  the  approval  of  the 
Secretary,  may  by  regulations  prescribe. 

The  tax  shall,  without  assessment  by  the  Com- 
missioner or  notice  from  the  collector,  be  due  and 
payable  to  the  collector  at  the  time  so  fixed  for  filing 
the  return.  If  the  tax  is  not  paid  when  due,  there 
shall  be  added  as  part  of  the  tax  a  penalty  of  5  per 
centum,  together  with  interest  at  the  rate  of  1  per 
centum  for  each  full  month,  from  the  time  when  the 
tax  became  due. 

Sec.  904.  (a)  That  on  and  after  May  1,  1919, 
there  shall  be  levied,  assessed,  collected,  and  paid  a 
tax  equivalent  to  10  per  centum  of  so  much  of  the 
amount  paid  for  any  of  the  following  articles  as  is 
in  excess  of  the  price  hereinafter  specified  as  to  each 
such    article,   when    such    article    is    sold    by   or 


Exciss   Taxes  1^ 

for  a  dealer  or  his  estate  on  or  after  such  date  for 
consumption  or  use — 

( 1 )  Carpets  and  rugs,  including  fiber,  except  im-  Carpcu  and  rugs 
ported  and  American  rugs  made  principally  of 

wool,  on  the  amount  in  excess  of  $5  per  square  yard ; 

(2)  Picture  frames,  on  the  amount  in  excess  of  Frames 
$10  each; 

(3)  Trunks,  on  the  amount  in  excess  of  $50  each;  Trunks 

(4)  Valises,  traveling  bags,  suit  cases,  hat  boxes  Valises, etc 
used  by  travelers,  and  fitted  toilet  cases,  on  the 
amount  in  excess  of  $25  each; 

(5)  Purses,   pocketbooks,   shopping  and  hand    ""®*'***^- 
bags,  on  the  amount  in  excess  of  $7.50  each; 

(6)  Portable  lighting  fixtures,  including  lamps  of  Ughting  fixtures 
all  kinds  and  lamp  shades,  on  the  amount  in  excess 

of  $25  each; 

(7)  Umbrellas,  parasols,  and  sun  shades,  on  the  Umbrellas, etc 
amount  in  excess  of  $4  each; 

k(8)  Fans,  on  the  amount  in  excess  of  $1  each;       Fans 
(9)  House  or  smoking  coats  or  jackets,  and  bath  House  coats,  etc 
or  lounging  robes,  on  the  amount  in  excess  of  $7.50 
each; 

(10)  Men's  waistcoats,  sold  separately  from  suits,  Waistcoats 
on  the  amount  in  excess  of  $5  each ; 
K     (11)   Women's  and  misses'  hats,  bonnets,  and  Women's  hats 
Tioods,  on  the  amount  in  excess  of  $15  each; 

(12)  Men's  and  boys'  hats,  on  the  amount  in  ex-  Men's  hats 
cess  of  $5  each; 

(13)  Men's  and  boys'  caps,  on  the  amount  in  ex-  Men's  caps 
cess  of  $2  each; 

(14)  Men's,  women's,  misses',  and  boys'  boots,  Boots  and  shoes 
shoes,  pumps,  and  sUppers,  not  including  shoes  or 
appliances  made  to  order  for  any  person  having  a 
crippled  or  deformed  foot  or  ankle,  on  the  amount 

in  excess  of  $10  per  pair; 

(15)  Men's  and  boys'  neckties  and  neckwear,  on  Men's  neckwear 
the  amount  in  excess  of  $2  each; 


100 


Rsysirux  Act 


Men's  hose 
Women's  hose 

Men's  shirts 

Underclothing,  etc 


Kimonos,  etc. 

Exceptions: 

Articles  taxed  as 
jewelry 


Articles  taxed  as  f ur 

liveries  and  sporting 
habits 

Taxes  to  bo  paid  by 
pwchaser 

Returns 
See  page  103 


Jewelry  sold  by 
dealers,  tax  on 


(16)  Men's  and  boys'  silk  stockings  or  hose,  on 
the  amount  in  excess  of  $1  per  pair ; 

(17)  Women's  and  misses'  silk  stockings  or  hose, 
on  the  amount  in  excess  of  $2  per  pair; 

(18)  Men's  shirts,  on  the  amount  in  excess  of 
$3  each; 

(19)  Men's,  women's,  misses',  and  boys'  pajamas, 
night  gowns,  and  underwear,  on  the  amount  in  ex- 
cess of  $5  each;  and 

(20)  Kimonos,  petticoats,  and  waists,  on  the 
amount  in  excess  of  $15  each. 

(b)  The  tax  imposed  by  this  section  shall  not  ap- 
ply (1)  to  any  article  enumerated  in  paragraphs 
(2)  to  (8),  both  inclusive,  of  subdivision  (a),  if 
such  article  is  made  of  or  ornamented,  mounted,  or 
fitted  with,  precious  metals  or  imitations  thereof  or 
ivory,  or  (2)  to  any  article  made  of  fur  on  the  hide 
or  pelt,  or  of  which  any  such  fur  is  the  component 
material  of  chief  value,  or  to  (3)  any  article  enumer- 
ated in  subdivision  (17)  or  (18)  of  section  900. 

(c)  The  taxes  imposed  by  this  section  shall  be 
paid  by  the  purchaser  to  the  vendor  at  the  time  of 
the  sale  and  shall  be  collected,  returned,  and  paid 
to  the  United  States  by  such  vendor  in  the  same 
manner  as  provided  in  section  502. 

Sec.  905.  That  on  and  after  April  1,  1919,  there 
shall  be  levied,  assessed,  collected,  and  paid  (in  lieu 
of  the  tax  imposed  by  subdivision  (e)  of  section 
600  of  the  Revenue  Act  of  1917)  upon  all  articles 
conmionly  or  conmiercially  known  as  jewelry, 
whether  real  or  imitation ;  pearls,  precious  and 
semi-precious  stones,  and  imitations  thereof ;  articles 
made  of,  or  ornamented,  mounted  or  fitted  with, 
precious  metals  or  imitations  thereof  or  ivory  (not 
including  surgical  instruments);  watches;  clocks; 
opera  glasses;  lorgnettes;  marine  glasses;  field 
glasses ;  and  binoculars ;  upon  any  of  the  above  when 


ExciseTaxes  151 

sold  by  or  for  a  dealer  or  his  estate  for  consumption 
or  use,  a  tax  equivalent  to  5  per  centum  of  the  price  Rue 
for  which  so  sold. 

Every  person  selling  any  of  the  articles  enumer-  Returns 
ated  in  this  section  shall  make  returns  under  oath 
in  duphcate  (monthly  or  quarterly  as  the  Commis- 
sioner, with  the  approval  of  the  Secretary,  may  pre- 
scribe) and  pay  the  taxes  imposed  in  respect  to  such 
articles  by  this  section  to  the  collector  for  the  dis- 
trict in  which  is  located  the  principal  place  of  busi- 
ness. Such  returns  shall  contain  such  information 
and  be  made  at  such  times  and  in  such  manner  as  the 
Commissioner,  with  the  approval  of  the  Secretary, 
may  by  regulations  prescribe. 

The  tax  shall,  without  assessment  by  the  Commis-  Collection  and 
sioner  or  notice  from  the  collector,  be  due  and  pay-  payment 
able  to  the  collector  at  the  time  so  fixed  for  fihng 
the  return.   If  the  tax  is  not  paid  when  due,  there 
shall  be  added  as  part  of  the  tax  a  penalty  of  5  Pentity 
per  centum,  together  with  interest  at  the  rate  of  1 
per  centum  for  each  full  month,  from  the  time  when 
the  tax  became  due. 

Sec.  906.  That  on  and  after  the  1st  day  of  May,  leatiag  motion  picture 
1919,  any  person  engaged  in  the  business  of  leasing  fiin»,t«xon 
or  Ucensing  for  exhibition  positive  motion-picture 
films  containing  pictures  ready  for  projection  shall 
pay  monthly  an  excise  tax  in  respect  to  carrying  on 
such  business  equal  to  5  per  centum  of  the  total  ren- 
tals earned  from  each  such  lease  or  license  during 
the  preceding  month.  If  a  person  owning  such  a 
film  exhibits  it  for  profit  he  shall  pay  a  tax  equiva- 
lent to  5  per  centum  of  the  fair  rental  or  Ucense 
value  of  such  film  at  the  time  and  place  where  and 
for  the  period  during  which  exhibited.  If  any  such 
person  has,  prior  to  December  6,  1918,  made  a  bona 
fide  contract  with  any  person  for  the  lease  or  licen- 
sing, after  the  tax  imposed  by  this  section  takes 


102 


Revexuk   Act 


Toilet  and  medicinal 
preparations  sold  by 
dealers,  tax  on 


Rate 


Perfumes  and 
cosmetics 


Patent  and  proprie- 
tary medicines 


effect,  of  such  a  film  for  exhibition  for  profit,  and  if 
such  contract  does  not  permit  the  adding  of  the 
whole  of  the  tax  imposed  by  this  section  to  the 
amount  to  be  paid  under  such  contract,  then  the  les- 
see or  Hcensee  shall,  in  lieu  of  the  lessor  or  licensor, 
pay  so  much  of  such  tax  as  is  not  so  permitted  to 
be  added  to  the  contract  price.  The  tax  imposed 
by  this  section  shall  be  in  heu  of  the  tax  imposed  by 
subdivisions  (c)  and  (d)  of  section  600  of  the  Reve- 
nue Act  of  1917. 

Sec.  907.  (a)  That  on  and  after  May  1,  1919, 
there  shall  be  levied,  assessed,  collected  and  paid 
(in  lieu  of  the  taxes  imposed  by  subdivisions  (g) 
and  (h)  of  section  600  of  the  Revenue  Act  of  1917) 
a  tax  of  1  cent  for  each  25  cents  or  fraction  thereof 
of  the  amount  paid  for  any  of  the  following  articles 
when  sold  by  or  for  a  dealer  or  his  estate  on  or  after 
such  date  for  consumption  or  use: 

(1)  Perfumes,  essences,  extracts,  toilet  waters, 
cosmetics,  petroleum  jellies,  hair  oils,  pomades,  hair 
dressings,  hair  restoratives,  hair  dyes,  tooth  and 
mouth  washes,  dentifrices,  tooth  pastes,  aromatic 
cachous,  toilet  powders  (other  than  soap  powders), 
or  any  similar  substance,  article,  or  preparation  by 
whatsoever  name  known  or  distinguished,  any  of  the 
above  which  are  used  or  apphed  or  intended  to  be 
used  or  applied  for  toilet  purposes; 

(2)  Pills,  tablets,  powders,  tinctures,  troches  or 
lozenges,  sirups,  medicinal  cordials  or  bitters,  ano- 
dynes, tonics,  plasters,  liniments,  salves,  ointments, 
pastes,  drops,  waters  (except  those  taxed  under  sec- 
tion 628  of  this  Act) ,  essences,  spirits,  oils,  and  other 
medicinal  preparations,  compounds,  or  composi- 
tions (not  including  serums  and  antitoxins),  upon 
the  amount  paid  for  any  of  the  above  as  to  which 
the  manufacturer  or  producer  claims  to  have  any 
private  formula,  secret,  or  occult  art  for  making  or 


Excise   Taxes 


lOS 


ions 


preparing  the  same,  or  has  or  claims  to  have  any 
exclusive  right  or  title  to  the  making  or  preparing 
the  same,  or  which  are  prepared,  uttered,  vended, 
or  exposed  for  sale  under  any  letters  patent,  or 
trade-mark,  or  which  (if  prepared  by  any  formula, 
published  or  unpublished)  are  held  out  or  recom- 
mended to  the  public  by  the  makers,  vendors,  or 
proprietors  thereof  as  proprietary  medicines  or  me- 
dicinal proprietary  articles  or  preparations,  or  as 
remedies  or  specifics  for  any  disease,  diseases,  or 
affection  whatever  affecting  the  human  or  animal 
body ;  Provided,  That  the  provisions  of  this  section  Exceptii 
shall  not  apply  to  the  sale  of  vaccines  and  bacter- 
ines  which  are  not  advertised  to  the  general  lay  pub- 
lic, nor  to  the  sale  by  a  physician  in  personal  at- 
tendance upon  a  patient  of  medicinal  preparations 
not  so  advertised. 

(b)  The  taxes  imposed  by  this  section  shall  be  col-  Method  of  coUecti 
lected  by  whichever  of  the  following  methods  the 

I  Commissioner  may  deem  expedient :  ( 1 )  by  stamp  (i)  Stamps 
afBxed  to  such  article  by  the  vendor,  the  cost  of 
which  shall  be  reimbursed  to  the  vendor  by  the  pur- 

[  chaser;  or  (2 )  by  payment  to  the  vendor  by  the  pur-  (2)  Payment  to 
chaser  at  the  time  of  the  sale,  the  taxes  so  collected  ^«n<*«' 
being  returned  and  paid  to  the  United  States  by 
such  vendor  in  the  same  manner  as  provided  in  sec-  See  page  103 
tion  502. 


ion 


TITLE  X. 
Special  Taxes 


Capital  stock  tax, 
effective  date 


For agn  corporations 


Sec.  1000.  (a)  That  on  and  after  July  1,  1918, 
in  lieu  of  the  tax  imposed  by  the  first  subdivision  of 
section  407  of  the  Revenue  Act  of  1916 — 

(1)  Every  domestic  corporation  shall  pay  an- 
nually a  special  excise  tax  with  respect  to  carrying 

Domestic  rorporations  ou  OT  doiug  busiucss,  equivalent  to  $1  for  each 

$1,000  of  so  much  of  the  fair  average  value  of  its 
capital  stock  for  the  preceding  year  ending  June 
thirtieth  as  is  in  excess  of  $5,000.  In  estimating 
the  value  of  capital  stock  the  surplus  and  undivided 
profits  shall  be  included; 

(2)  Every  foreign  corporation  shall  pay  an- 
nually a  special  excise  tax  with  respect  to  carrying 
on  or  doing  business  in  the  United  States,  equiva- 
lent to  $1  for  each  $1,000  of  the  average  amount  of 
capital  employed  in  the  transaction  of  its  business 
in  the  United  States  during  the  preceding  year  end- 
ing June  thirtieth. 

(b)  In  computing  the  tax  in  the  case  of  insurance 
companies  such  deposits  and  reserve  funds  as  they 
are  required  by  law  or  contract  to  maintain  or  hold 
for  the  protection  of  or  payment  to  or  apportion- 
ment among  poUcyholders  shall  not  be  included. 

(c)  The  taxes  imposed  by  this  section  shall  not 
apply  in  any  year  to  any  corporation  which  was  not 
engaged  in  business  (or  in  the  case  of  a  foreign  cor- 
poration not  engaged  in  business  in  the  United 
States)  during  the  preceding  year  ending  June  30, 
nor  to  any  corporation  enumerated  in  section  231. 


Insurance  companies' 


reserves 


Exenq)tions 


See  page  44 


164 


SrsoiAL  Taxxs  li$ 

The  taxes  imposed  by  this  section  shall  apply  to  Mutual. insurance 
mutual  insurance  companies,  and  in  the  case  of  companies,  tax  on 
every   such   domestic  company   the   tax   shall   be 
equivalent  to  $1  for  each  $1,000  of  the  excess  over 
$5,000  of  the  sum  of  its  sm'plus  or  contingent  re- 
serves maintained  for  the  general  use  of  the  business 
and  any  reserves  the  net  additions  to  which  are  in- 
cluded in  net  income  under  the  provisions  of  Title 
II,  as  of  the  close  of  the  preceding  accounting  pe- 
riod used  by  such  company  for  purposes  of  making 
its  income  tax  return;  Provided,  That  in  the  case 
of  a  foreign  mutual  insurance  company  the  tax  shall  Foreign  mutual 
be  equivalent  to  $1  for  each  $1,000  of  the  same  pro-  ^"""'"  """'**""• 
portion  of  the  sum  of  such  surplus  and  reserves, 
which  the  reserve  fund  upon  business  transacted 
within  the  United  States  is  of  the  total  reserve  upon 
all  business  transacted,  as  of  the  close  of  the  preced- 
ing accounting  period  used  by  such  company  for 
purposes  of  making  its  income  tax  return. 

(d)   Section  257  shall  apply  to  all  returns  filed  Returns, see  payees 
with  the  Commissioner  for  purposes  of  the  tax  im- 
posed by  this  section. 

Sec.  1001.  That  on  and  after  January  1,  1919,  Spedai  occupational 
there  shall  be  levied,  collected,  and  paid  annually  *""'  *^^'*^^*  ^^^ 
the  following  special  taxes — 

( 1 )  Brokers  shall  pay  $50.  Every  person  whose  Brokers 
business  it  is  to  negotiate  purchases  or  sales  of 
stocks,  bonds,  exchange,  bullion,  coined  money, 
bank  notes,  promissory  notes,  other  securities,  pro- 
duce or  merchandise,  for  others,  shall  be  regarded 
as  a  broker.  If  a  broker  is  a  member  of  a  stock 
exchange,  or  if  he  is  a  member  of  any  produce  ex- 
change, board  of  trade,  or  similar  organization, 
where  produce  or  merchandise  is  sold,  he  shall  pay 
an  additional  amount  as  follows:  If  the  average 
value,  during  the  preceding  year  ending  June  30,  of 
a  seat  or  membership  in  such  exchange  or  organiza- 


$JSfi 


Revenue   Act 


Pawnbrokers 


Ship  brokers 


Customs  brokers 


Proprietors  of  amuse- 
ment places 


tion  was  $2,000  or  more  but  not  more  than  $5,000, 
$100;  if  such  value  was  more  than  $5,000,  $150. 

(2)  Pawnbrokers  shall  pay  $100.  Every  person 
whose  business  or  occupation  it  is  to  take  or  receive, 
by  way  of  pledge,  pawn,  or  exchange,  any  goods, 
wares,  or  merchandise,  or  any  kind  of  personal  prop- 
erty whatever,  as  security  for  the  repayment  of 
money  loaned  thereon,  shall  be  regarded  as  a  pawn- 
broker. 

(3)  Ship  brokers  shall  pay  $50.  Every  person 
whose  business  it  is  as  a  broker  to  negotiate  freights 
and  other  business  for  the  owners  of  vessels,  or  for 
the  shippers  or  consignors  or  consignees  of  freight 
carried  by  vessels,  shall  be  regarded  as  a  ship  broker. 

(4)  Customhouse  brokers  shall  pay  $50.  Every 
person  whose  occupation  it  is,  as  the  agent  of  others, 
to  arrange  entries  and  other  customhouse  papers, 
or  transact  business  at  any  port  of  entry  relating  to 
the  importation  or  exportation  of  goods,  wares,  or 
merchandise,  shall  be  regarded  as  a  customhouse 
broker. 

(5)  Proprietors  of  theaters,  museums,  and  con- 
cert halls,  where  a  charge  for  admission  is  made, 
having  a  seating  capacity  of  not  more  than  two  hun- 
dred and  fifty,  shall  pay  $50 ;  having  a  seating  ca- 
pacity of  more  than  two  hundred  and  fifty  and  not 
exceeding  five  hundred,  shall  pay  $100;  having  a 
seating  capacity  exceeding  five  hundred  and  not  ex- 
ceeding eight  hundred,  shall  pay  $150;  having  a 
seating  capacity  of  more  than  eight  hundred,  shall 
pay  $200.  Every  edifice  used  for  the  purpose  of 
dramatic  or  operatic  or  other  representations,  plays, 
or  performances,  for  admission  to  which  entrance 
money  is  received,  not  including  halls  or  armories 
rented  or  used  occasionally  for  concerts  or  theatrical 
representations,  and  not  including  edifices  owned 
by  religious,  educational  or  charitable  institutions, 


Special  Taxis  1^''' 

societies  or  organizations  where  all  the  proceeds 
from  admissions  inure  exclusively  to  the  benefit  of 
such  institutions,  societies  or  organizations  or  exclu- 
sively to  the  benefit  of  persons  in  the  military  or 
naval  forces  of  the  United  States,  shall  be  regarded 
as  a  theatre;  Provided,  That  in  cities,  towns,  or  Tax  rates  in  towni 
villages  of  five  thousand  inhabitants  or  less  the  ""**«'' ^^^^ 
amount  of  such  payment  shall  be  one-half  of  that 
above  stated;  Provided  further.  That  whenever  any 
such  edifice  is  under  lease  at  the  time  the  tax  is  due,  Leased  hafls 
the  tax  shall  be  paid  by  the  lessee,  unless  otherwise 
stipulated  between  the  parties  to  the  lease. 

(6)  The  proprietor  or  proprietors  of  circuses  Circus  proprietors 
shall  pay  $100.     Every  building,  space,  tent,  or 

area,  where  feats  of  horsemanship  or  acrobatic 
sports  or  theatrical  performances  not  otherwise  pro- 
vided for  in  this  section  are  exhibited  shall  be  re- 
garded as  a  circus;  Provided,  That  no  special  tax 
paid  in  one  State,  Territory,  or  the  District  of 
Columbia  shall  exempt  exhibitions  from  the  tax  in 
another  State,  Territory,  or  the  District  of  Colum- 
bia, and  but  one  special  tax  shall  be  imposed  for 
exhibitions  within  any  one  State,  Territory,  or  Dis- 
trict. 

(7)  Proprietors  or  agents  of  all  other  public  ex-  Proprietors  of 
hibitions  or  shows  for  money  not  enumerated  in  this  «hibitions 
section  shall  pay  $15;  Provided,  That  a  special  tax 

paid  in  one  State,  Territory,  or  the  District  of  Col- 
umbia shall  not  exempt  exhibitions  from  the  tax  in 
another  State,  Territory,  or  the  District  of  Colum- 
bia, and  but  one  special  tax  shall  be  required  for 
exhibitions  within  any  one  State,  Territory,  or  the 
District  of  Columbia;  Provided  further,  That  this  Exceptions 
paragraph  shall  not  apply  to  Chautauquas,  lecture 
lyceums,  agricultural  or  industrial  fairs,  or  exhibi- 
tions held  under  the  auspices  of  religious  or  charit- 
able associations ;  Provided  further,  That  an  aggre- 


^ 


IM 


Revekui   Act 


Proprietors  of 
bowling  alleys  and 
billiard  rooms 


Proprietors  of 
shooting  galleries 


Proprietors  of  riding 
academies 


Persons  renting 
autos  for  hire 


Brewers,  AstiHers 
and  liquor  dealers 


gation  of  entertainments,  known  as  a  street  fair, 
shall  not  pay  a  larger  tax  than  $100  in  any  State, 
Territory,  or  in  the  District  of  Colximbia. 

(8)  Proprietors  of  bowling  alleys  and  bilUard 
rooms  shall  pay  $10  for  each  alley  or  table.  Every 
building  or  place  where  bowls  are  thrown  or  where 
games  of  billiards  or  pool  are  played,  except  in  pri- 
vate homes,  shall  be  regarded  as  a  bowling  alley  or 
a  billiard  room,  respectively. 

(9)  Proprietors  of  shooting  galleries  shall  pay 
$20.  Every  building,  space,  tent,  or  area,  where 
a  charge  is  made  for  the  discharge  of  firearms  at 
any  form  of  target  shall  be  regarded  as  a  shooting 
gallery. 

(10)  Proprietors  of  riding  academies  shall  pay 
$100.  Every  building,  space,  tent,  or  area,  where 
a  charge  is  made  for  instruction  in  horsemanship 
or  for  facilities  for  the  practice  of  horsemanship 
shall  be  regarded  as  a  riding  academy. 

(11)  Persons  carrying  on  the  business  of  operat- 
ing or  renting  passenger  automobiles  for  hire  shall 
pay  $10  for  each  such  automobile  having  a  seating 
capacity  of  more  than  two  and  not  more  than  seven, 
and  $20  for  each  such  automobile  having  a  seating 
capacity  of  more  than  seven. 

(12)  Every  person  carrying  on  the  business  of  a 
brewer,  distiller,  wholesale  liquor  dealer,  retail 
liquor  dealer,  wholesale  dealer  in  malt  liquor,  retail 
dealer  in  malt  liquor,  or  manufacturer  of  stills,  as 
defined  in  section  3244  as  amended  and  section  3247 
of  the  Revised  Statutes,  in  any  State,  Territory,  or 
District  of  the  United  States  contrary  to  the  laws 
of  such  State,  Territory,  or  District,  or  in  any  place 
therein  in  which  carrying  on  such  business  is  pro- 
hibited by  local  or  municipal  law,  shall  pay,  in  ad- 
dition to  all  other  taxes,  special  or  otherwise,  im- 
posed by  existing  law  or  by  this  Act,  $1,000. 


SfeoialTaxks  169 

The  payment  of  the  tax  imposed  by  this  sub- 
i  division  shall  not  be  held  to  exempt  any  person  from 
any  penalty  or  punishment  provided  for  by  the  laws 
of  any  State,  Territory,  or  District  for  carrying  on 
such  business  in  such  State,  Territory,  or  District, 
or  in  any  manner  to  authorize  the  commencement 
or  continuance  of  such  business  contrary  to  the  laws 
of  such  State,  Territory,  or  District,  or  in  places 
prohibited  by  local  or  municipal  law. 

The  taxes  imposed  by  this  section  shall,  in  the 
case  of  persons  upon  whom  a  corresponding  tax  is 
imposed  by  section  407  of  the  Revenue  Act  of  1916, 
be  in  lieu  of  such  tax. 

Sec.  1002.  That  on  and  after  January  1,  1919,  Annual  sales;  uxa* 
there  shall  be  levied,  collected,  and  paid  annually,  <»:  effective  dale 
in  lieu  of  the  taxes  imposed  by  section  408  of  the 
Revenue  Act  of  1916,  the  following  special  taxes, 
the  amount  of  such  taxes  to  be  computed  on  the 
basis  of  the  sales  for  the  preceding  year  ending  June 
30— 

Manufacturers  of  tobacco  whose  annual  sales  do  Tobacco  manu- 
not  exceed  fifty  thousand  pounds  shall  each  pay  $6 ;  toners 

R  Manufacturers  of  tobacco  whose  annual  sales  ex- 
ceed fifty  thousand  and  do  not  exceed  one  hundred 
thousand  pounds  shall  each  pay  $12; 

Manufacturers  of  tobacco  whose  annual  sales  ex- 
ceed one  hundred  thousand  and  do  not  exceed  two 
hundred  thousand  pounds  shall  each  pay  $24; 

Manufacturers  of  tobacco  whose  annual  sales  ex- 
ceed two  hundred  thousand  pounds  shall  each  pay 
$24,  and  at  the  rate  of  16  cents  per  thousand 
pounds,  or  fraction  thereof,  in  respect  to  the  excess 
over  two  hundred  thousand  pounds; 

Manufacturers  of  cigars  whose  annual  sales  do  Ggar 
not  exceed  fifty  thousand  cigars  shall  each  pay  $4 ;  n>«nufacture 

Manufacturers  of  cigars  whose  annual  sales  ex- 


100 


Revenue   Act 


Ggarette 
manufacturers 


Tax  on  use  of 
pleasure  boats, 
effective  date 


Qassification  and 
rates 


ceed  fifty  thousand  and  do  not  exceed  one  hundred 
thousand  cigars  shall  each  pay  $6 ; 

Manufacturers  of  cigars  whose  annual  sales  ex- 
ceed one  hundred  thousand  and  do  not  exceed  two 
hundred  thousand  cigars  shall  each  pay  $12; 

Manufacturers  of  cigars  whose  annual  sales  ex- 
ceed two  hundred  thousand  and  do  not  exceed  four 
hundred  thousand  cigars  shall  each  pay  $24 ; 

Manufacturers  of  cigars  whose  annual  sales  ex- 
ceed four  hundred  thousand  cigars  shall  each  pay 
$24,  and  at  the  rate  of  10  cents  per  thousand  cigars, 
or  fraction  thereof,  in  respect  to  the  excess  over 
four  hundred  thousand  cigars ; 

Manufacturers  of  cigarettes,  including  small 
cigars  weighing  not  more  than  three  pounds  per 
thousand,  shall  each  pay  at  the  rate  of  6  cents  for 
every  ten  thousand  cigarettes,  or  fraction  thereof. 

In  arriving  at  the  amount  of  special  tax  to  be 
paid  under  this  section,  and  in  the  levy  and  collec- 
tion of  such  tax,  each  person  engaged  in  the  manu- 
facture of  more  than  one  of  the  classes  of  articles 
specified  in  this  section  shall  be  considered  and 
deemed  a  manufacturer  of  each  class  separately. 

Sec.  1003.  That  sixty  days  after  the  passage  of 
this  Act,  and  thereafter  on  July  1  in  each  year,  and 
also  at  the  time  of  the  original  purchase  of  a  new 
boat  by  a  user,  if  on  any  other  date  than  July  1, 
there  shall  be  levied,  assessed,  collected,  and  paid  in 
lieu  of  the  tax  imposed  by  section  603  of  the  Reve- 
nue Act  of  1917,  upon  the  use  of  yachts,  pleasure 
boats,  power  boats,  and  sailing  boats,  of  over  five 
net  tons,  and  motor  boats  with  fixed  engines,  not 
used  exclusively  for  trade,  fishing  or  national  de- 
fense, or  not  built  according  to  plans  and  specifica- 
tions approved  by  the  Navy  Department,  a  special 
excise  tax  to  be  based  on  each  yacht  or  boat,  at  rates 
as  follows:    Yachts,  pleasure  boats,  power  boats. 


Special  Taxes  101 

motor  boats  with  fixed  engines,  and  sailing  boats,  of 
over  five  net  tons,  length  not  over  fifty  feet,  $1  for 
each  foot;  length  over  fifty  feet  and  not  over  one 
hundred  feet,  $2  for  each  foot ;  length  over  one  hun- 
dred feet,  $4  for  each  foot ;  motor  boats  of  not  over 
five  net  tons  with  fixed  engines,  $10. 

In  determining  the  length  of  such  yachts,  pleas-  Measurement  of 
ure  boats,  power  boats,  motor  boats  with  fixed  en-  **"«*** 
gines,  and  sailing  boats,  the  measurement  of  over-all 
length  shall  govern. 

In  the  case  of  a  tax  imposed  at  the  time  of  the  ^ax  for  portion  of 
original  purchase  of  a  new  boat  on  any  other  date 
than  July  1,  and  in  the  case  of  the  tax  taking  effect 
sixty  days  after  the  passage  of  this  Act,  the  amount 
to  be  paid  shall  be  the  same  number  of  twelfths  of 
the  amount  of  the  tax  as  the  number  of  calendar 
months  (including  the  month  of  sale,  or  the  month 
in  which  is  included  the  sixty-first  day  after  the 
passage  of  this  Act,  as  the  case  may  be)  remaining 
prior  to  the  following  July  1. 

If  the  tax  imposed  by  section  603  of  the  Revenue  Credit  for  tax  paid 
Act  of  1917,  for  the  fiscal  year  ending  June  30,  ^^e'^  Revenue  Act 
1919,  has  been  paid  in  respect  to  the  use  of  any  boat, 
the  amount  so  paid  shall  under  such  regulations  as 
the  Commissioner,  with  the  approval  of  the  Secre- 
tary, may  prescribe,  be  credited  upon  the  first  tax 
due  under  this  section  in  respect  to  the  use  of  such 
boat,  or  be  refunded  to  the  person  paying  the  first 
tax  imposed  by  this  section  in  respect  to  the  use  of 
such  boat. 

Sec.  1004.  That  if  the  tax  imposed  by  section  Credit  for  tax  paid 
407  or  408  of  the  Revenue  Act  of  1916,  for  the  fiscal  ""**«^  R*'^^""^  Act 
year  ending  June  30,  1919,  has  been  paid  by  any 
person  subject  to  the  corresponding  tax  imposed 
by  this  title,  collectors  may  issue  a  receipt  in  lieu  of 
special  tax  stamp  for  the  amount  by  which  the  tax 
under  this  title  is  in  excess  of  that  paid  or  payable 


i 


162 


Retbitue   Act 


Penalty  for  failure 
to  pay  occupational 
tax 


Harrison  Narcotic 
Act  amended 


Tax  on  dealer  in 
drugs 


Registration  of  drug 
dealers 


and  evidenced  by  stamp  under  the  Revenue  Act  of 
1916.  Such  receipt  shall  be  posted  as  in  the  case  of 
the  special  tax  stamp,  as  provided  by  law,  and  with 
it,  within  the  place  of  business  of  the  taxpayer. 

If  the  corresponding  tax  imposed  by  section  407 
of  the  Revenue  Act  of  1916  was  not  payable  by 
stamp,  the  amount  paid  under  such  section  for  any 
period  for  which  a  tax  is  also  imposed  by  this  title 
may  be  credited  against  the  tax  imposed  by  this  title. 

Sec.  1005.  That  any  person  who  carries  on  any 
business  or  occupation  for  which  a  special  tax  is  im- 
posed by  sections  1000,  1001,  or  1002,  without  hav- 
ing paid  the  special  tax  therein  provided,  shall,  be- 
sides being  liable  for  the  payment  of  such  special 
tax,  be  subject  to  a  penalty  of  not  more  than  $1,000 
or  to  imprisonment  for  not  more  than  one  year,  or 
both. 

Sec.  1006.  That  section  1  of  the  Act  of  Congress 
approved  December  17, 1914,  is  hereby  amended  to 
read  as  follows: 

"Section  1.  That  on  or  before  July  1  of  each 
year  every  person  who  imports,  manufactures,  pro- 
duces, compounds,  sells,  deals  in,  dispenses,  or  gives 
away  opium  or  coca  leaves,  or  any  compound  manu- 
facture, salt,  derivative,  or  preparation  thereof,  shall 
register  with  the  collector  of  internal  revenue  of  the 
district  his  name  or  style,  place  of  business  and  place 
or  places  where  such  business  is  to  be  carried  on,  and 
pay  the  special  taxes  hereinafter  provided ; 

"Every  person  who  on  January  1,  1919,  is  en- 
gaged in  any  of  the  activities  above  enumerated,  or 
who  between  such  date  and  the  passage  of  this  Act 
first  engages  in  any  of  such  activities,  shall  within  30 
days  after  the  passage  of  this  Act  make  like  regis- 
tration, and  shall  pay  the  proportionate  part  of  the 
tax  for  the  period  ending  June  30, 1919 ;  and 

"Every  person  who  first  engages  in  any  of  such 


t 


Spbczal  Taxks  168 

activities  after  the  passage  of  this  Act  shall  immedi- 

V  ately  make  like  registration  and  pay  the  propor- 

i  tionate  part  of  the  tax  for  the  period  ending  on  the 

;  following  June  30th ;                                               ^ 

;  "Importers,  manufacturers,  producers,  or  com-  Rates  of  tax 

I  pounders,  $24  per  annum;  wholesale  dealers,  $12 

I  per  annum ;  retail  dealers,  $6  per  annum ;  physicians, 

[  dentists,  veterinary  surgeons,  and  other  practition- 

5  ers  lawfully  entitled  to  distribute,  dispense,  give 

f  away,  or  administer  any  of  the  aforesaid  drugs  to 

[  patients  upon  whom  they  in  the  course  of  their  pro- 

j.  f  essional  practice  are  in  attendance,  shall  pay  $3  per 


I.;- 


annum. 


Every  person  who  imports,  manufactures,  com-  Definitions: 
r    pounds,  or  otherwise  produces  for  sale  or  distribu-  in»p®'^*«»'»  "«»"• 

H..  n  i.\^        J*  'jj  inT_j  jj.      facturer  or  producer 

I    tion  any  oi  the  aforesaid  drugs  shall  be  deemed  to 

fi    be  an  importer,  manufacturer,  or  producer. 

I        "Every  person  who  sells  or  offers  for  sale  any  of  wholesale  dealer 

I    said  drugs  in  the  original  stamped  packages,  as 

I    hereinafter  provided,  shall  be  deemed  a  wholesale 

I    dealer. 

"Every  person  who  sells  or  dispenses  from  orig-  Retail  dealer 
inal  stamped  packages,  as  herein  provided,  shall  be 
deemed  a  retail  dealer ;  Provided,  That  the  office.  Place  of  business 
or  if  none,  the  residence,  of  any  person  shall  be  con- 
sidered for  the  purpose  of  this  Act  his  place  of  busi-  Exceptions: 
ness ;  but  no  employee  of  any  person  who  has  regis-  Employees 
tered  and  paid  special  tax  as  herein  required,  acting 
within  the  scope  of  his  employment,  shall  be  required 
to  register  and  pay  special  tax  provided  by  this  sec- 
tion; Provided  further.  That  officials  of  the  United  Public  officials 
States,  Territorial,  District  of  Columbia,  or  insular 
possessions.  State  or  municipal  governments,  who 
in  the  exercise  of  their  official  duties  engage  in  any 
of  the  business  herein  described,  shall  not  be  re- 
quired to  register,  nor  pay  special  tax,  nor  stamp 
the  aforesaid  drugs  as  hereinafter  prescribed,  but 


IM 


Reveitue   Act 


Registration  must 
precede  dealing 


Person  defined 


Tax  on  drugs 


Rate 


Use  of  original 
stamped  packages 


their  right  to  this  exemption  shall  be  evidenced  in 
such  manner  as  the  Commissioner  of  Internal  Reve- 
nue, with  the  approval  of  the  Secretary  of  the  Treas- 
ury, may  by  regulations  prescribe. 

"It  shall  be  unlawful  for  any  person  required  to 
register  under  the  provisions  of  this  Act  to  import, 
manufacture,  produce,  compound,  sell,  deal  in,  dis- 
pense, distribute,  administer,  or  give  away  any  of 
the  aforesaid  drugs  without  having  registered  and 
paid  the  special  tax  as  imposed  by  this  section. 

"That  the  word  'person'  as  used  in  this  Act  shall 
be  construed  to  mean  and  include  a  partnership, 
association,  company,  or  corporation,  as  well  as  a 
natural  person ;  and  all  provisions  of  existing  law  re- 
lating to  special  taxes,  as  far  as  necessary,  are  here- 
by extended  and  made  applicable  to  this  section. 

"That  there  shall  be  levied,  assessed,  collected, 
and  paid  upon  opium,  coca  leaves,  any  compound, 
salt,  derivative,  or  preparation  thereof,  produced  in 
or  imported  into  the  United  States,  and  sold,  or  re- 
moved for  consumption  or  sale,  an  internal-revenue 
tax  at  the  rate  of  1  cent  per  ounce,  and  any  fraction 
of  an  ounce  in  a  package  shall  be  taxed  as  an  ounce, 
such  tax  to  be  paid  by  the  importer,  manufacturer, 
producer,  or  compoimder  thereof,  and  to  be  repre- 
sented by  appropriate  stamps,  to  be  provided  by  the 
Commissioner  of  Internal  Revenue,  with  the  ap- 
proval of  the  Secretary  of  the  Treasury;  and  the 
stamps  herein  provided  shall  be  so  affixed  to  the  bot- 
tle or  other  container  as  to  securely  seal  the  stopper, 
covering,  or  wrapper  thereof. 

"The  tax  imposed  by  this  section  shall  be  in  addi- 
tion to  any  import  duty  imposed  on  the  aforesaid 
drugs. 

"It  shall  be  unlawful  for  any  person  to  purchase, 
sell,  dispense,  or  distribute  any  of  the  aforesaid 
drugs  except  in  the  original  stamped  package  or 


Special  Taxes  195 

from  the  original  stamped  package ;  and  the  absence 
of  appropriate  tax-paid  stamps  from  any  of  the 
aforesaid  drugs  shall  be  prima  facie  evidence  of  a 
violation  of  this  section  by  the  person  in  whose  pos- 
session same  may  be  found;  and  the  possession  of 
any  original  stamped  package  containing  any  of  the 
aforesaid  drugs  by  any  person  who  has  not  regis- 
tered and  paid  special  taxes  as  required  by  this  sec- 
tion shall  be  prima  facie  evidence  of  liabiUty  to  such 
special  tax;  Provided,  That  the  provisions  of  this  Exceptions 
paragraph  shall  not  apply  to  any  person  having  in 
his  or  her  possession  any  of  the  aforesaid  drugs 
which  have  been  obtained  from  a  registered  dealer 
in  pursuance  of  a  prescription,  written  for  legiti- 
mate medical  uses,  issued  by  a  physician,  dentist, 
veterinary  surgeon,  or  other  practitioner  registered 
under  this  Act;  and  where  the  bottle  or  other  con- 
tainer in  which  such  drug  may  be  put  up  by  the 
dealer  upon  said  prescription  bears  the  name  and 
registry  number  of  the  druggist,  serial  number  of 
prescription,  name  and  address  of  the  patient,  and 
name,  address,  and  registry  number  of  the  person 
writing  said  prescription;  or  to  the  dispensing,  or 
administration,  or  giving  away  of  any  of  the  afore- 
said drugs  to  a  patient  by  a  registered  physician, 
dentist,  veterinary  surgeon,  or  other  practitioner  in 
the  course  of  his  professional  practice,  and  where 
said  drugs  are  dispensed  or  administered  to  the  pa- 
tient for  legitimate  medical  purposes,  and  the  record 
kept  as  required  by  this  Act  of  the  drugs  so  dis- 
pensed, administered,  distributed,  or  given  away. 

"And  all  the  provisions  of  existing  laws  relating    Extension  of  reyenue 

to  the  engraving,  issuance,  sale,  accountability,  can-  «»»"p  *«w 
cellation,  and  destruction  of  tax-paid  stamps  pro- 
vided for  in  the  internal-revenue  laws  are,  in  so  far 
as  necessary,  hereby  extended  and  made  to  apply  to 
stamps  provided  by  this  section. 


166 


RcvBirns   Act 


Unstamped  packages 
subject  to  seizure 


Records  and  returns 


Regulations  by 
Conunissioner 


Act  of  December  17, 
1914,  amended 


Exceptions 


"That  all  unstamped  packages  of  the  aforesaid 
drugs  found  in  the  possession  of  any  person,  except 
as  herein  provided,  shall  be  subject  to  seizure  and 
forfeiture,  and  all  the  provisions  of  existing  inter- 
nal-revenue laws  relating  to  searches,  seizures,  and 
forfeitures  of  unstamped  articles  are  hereby  ex- 
tended to  and  made  to  apply  to  the  articles  taxed 
under  this  Act  and  the  persons  upon  whom  these 
taxes  are  imposed. 

"Importers,  manufacturers,  and  wholesale  deal- 
ers shall  keep  such  books  and  records  and  render 
such  monthly  returns  in  relation  to  the  transactions 
in  the  aforesaid  drugs  as  the  Commissioner  of  In- 
ternal Revenue,  with  the  approval  of  the  Secretary 
of  the  Treasury,  may  by  regulations  require. 

"The  Commissioner  of  Internal  Revenue,  with 
the  approval  of  the  Secretary  of  the  Treasury,  shall 
make  all  needful  rules  and  regulations  for  carrying 
the  provisions  of  this  Act  into  effect." 

Sec.  1007.  That  section  6  of  such  Act  of  De- 
cember 17,  1914,  is  hereby  amended  to  read  as  fol- 
lows: 

"Sec.  6.  That  the  provisions  of  this  Act  shall  not 
be  construed  to  apply  to  the  manufacture,  sale,  dis- 
tribution, giving  away,  dispensing,  or  possession  of 
preparations  and  remedies  which  do  not  contain 
more  than  two  grains  of  opium,  or  more  than  one- 
fourth  of  a  grain  of  morphine,  or  more  than  one- 
eighth  of  a  grain  of  heroin,  or  more  than  one  grain 
of  codeine,  or  any  salt  or  derivative  of  any  of  them 
in  one  fluid  ounce,  or,  if  a  solid  or  semisolid  prepara- 
tion, in  one  avoirdupois  ounce;  or  to  liniments,  oint- 
ments, or  other  preparations  which  are  prepared  for 
external  use  only,  except  liniments,  ointments,  and 
other  preparations  which  contain  cocaine  or  any  of 
its  salts  or  alpha  or  beta  eucaine  or  any  of  their  salts 
jT  any  synthetic  substitute  for  them ;  Provided,  That 


Special   Taxss  ^^'^ 

such  remedies  and  preparations  are  manufactured, 
sold,  distributed,  given  away,  dispensed,  or  pos- 
sessed as  medicines  and  not  for  the  purpose  of  evad- 
ing the  intentions  and  provisions  of  this  Act;  Pro- 
vided further.  That  any  manufacturer,  producer, 
compounder,  or  vendor  (including  dispensing  phy- 
sicians) of  the  preparations  and  remedies  men- 
tioned in  this  section  shall  keep  a  record  of  all  sales, 
exchanges,  or  gifts  of  such  preparations  and  reme- 
dies in  such  manner  as  the  Commissioner  of  Inter- 
nal Revenue,  with  the  approval  of  the  Secretary  of 
the  Treasury,  shall  direct.  Such  record  shall  be 
preserved  for  a  period  of  two  years  in  such  a  way 
as  to  be  readily  accessible  to  inspection  by  any  offi- 
cer, agent,  or  employee  of  the  Treasury  Depart- 
ment duly  authorized  for  that  purpose,  and  the 
state,  territorial,  district,  municipal,  and  insular  offi- 
cers named  in  section  5  of  this  act,  and  every  such 
person  so  possessing  or  disposing  of  such  prepara- 
tions and  remedies  shall  register  as  required  in  sec-  Registration 
tion  1  of  this  act  and,  if  he  is  not  paying  a  tax  under 
this  act,  he  shall  pay  a  special  tax  of  $1  for  each  Special  tax 
year,  or  fractional  part  thereof,  in  which  he  is  en- 
gaged in  such  occupation,  to  the  collector  of  internal 
revenue  of  the  district  in  which  he  carries  on  such 
occupation  as  provided  in  this  act.  The  provisions 
of  this  act  as  amended  shall  not  apply  to  decocain- 
ized  coca  leaves  or  preparations  made  therefrom,  or 
to  other  preparations  of  coca  leaves  which  do  not 
contain  cocaine.*' 

Sec.  1008.  That  all  opium,  its  salts,  derivatives,  Confiscation  of 
and  compounds,  and  coca  leaves,  salts,  derivatives,  **™«» 
and  compounds  thereof,  which  may  now  be  under 
seizure  or  which  may  hereafter  be  seized  by  the 
United  States  Government  from  any  person  or  per- 
sons charged  with  any  violation  of  the  Act  of  Octo- 
ber 1,  1890,  as  amended  by  the  Acts  of  March  3, 


168  Revexue   Act 

1897,  February  9,  1909,  and  January  17,  1914,  or 
the  Act  of  December  17, 1914,  shall  upon  conviction 
of  the  person  or  persons  from  whom  seized  be  con- 
fiscated by  and  forfeited  to  the  United  States ;  and 
Disposition  of  the  Secretary  is  hereby  authorized  to  deUver  for 

confiscated  drugs        mcdical  or  Scientific  purposes  to  any  department, 

bureau,  or  other  agency  of  the  United  States  Gov- 
ernment, upon  proper  application  therefor  under 
such  regulation  as  may  be  prescribed  by  the  Com- 
missioner, with  the  approval  of  the  Secretary,  any 
of  the  drugs  so  seized,  confiscated,  and  forfeited  to 
the  United  States. 

The  provisions  of  this  section  shall  also  apply  to 
any  of  the  aforesaid  drugs  seized  or  coming  into  the 
possession  of  the  United  States  in  the  enforcement 
of  any  of  the  above-mentioned  Acts  where  the  own- 
er or  owners  thereof  are  unknown.  None  of  the 
aforesaid  drugs  coming  into  possession  of  the  United 
States  under  the  operation  of  said  Acts,  or  the  pro- 
visions of  this  section,  shall  be  destroyed  without 
certification  by  a  committee  appointed  by  the  Com- 
missioner, with  the  approval  of  the  Secretary,  that 
they  are  of  no  value  for  medical  or  scientific  pur- 
poses. 
Repeal  of  prior  acu  Sec.  1009.    That  the  Act  approvcd  October  22, 

1914,  entitled  "An  Act  to  increase  the  internal  rev- 
enue, and  for  other  purposes,"  and  the  joint  resolu- 
tion approved  December  17,  1915,  entitled  "Joint 
resolution  extending  the  provisions  of  the  Act  en- 
titled *An  Act  to  increase  the  internal  revenue,  and 
for  other  purposes,'  approved  October  twenty-sec- 
ond, nineteen  hundred  and  fourteen,  to  December 
thirty-first,  nineteen  hundred  and  sixteen,"  are  here- 
by repealed,  except  that  the  provisions  of  such  Act 
shall  remain  in  force  for  the  assessment  and  collec- 
tion of  all  special  taxes  imposed  by  sections  3  and  4 
thereof,  or  by  such  sections  as  extended  by  such 


Special  Taxes 


169 


joint  resolution,  for  any  year  or  part  thereof  ending 
prior  to  January  1,  1917,  and  of  all  other  taxes  im- 
posed by  such  Act,  or  by  such  Act  as  so  extended, 
accrued  prior  to  September  8, 1916,  and  for  the  im- 
position and  collection  of  all  penalties  or  forfeitures 
which  have  accrued  or  may  accrue  in  relation  to  any 
of  such  taxes. 


TITLE  XL 
Stamp  Taxes 


Stamp  taxes, 
effective  date 


Basis  of  tax 


Exemptions: 
Obligations  of 
governments 


Bonds  reqinred  by 
United  States 


Securities  of  mutual 
building  and  loan 
and  ditch  companies 


Sec.  1100.  That  on  and  after  April  1,  1919, 
there  shall  be  levied,  collected,  and  paid,  for  and  in 
respect  of  the  several  bonds,  debentures,  or  certifi- 
cates of  stock  and  of  indebtedness,  and  other  docu- 
ments, instruments,  matters,  and  things  mentioned 
and  described  in  Schedule  A  of  this  title,  or  for  or  in 
respect  of  the  vellum,  parchment,  or  paper  upon 
which  such  instruments,  matters,  or  things,  or  any 
of  them,  are  written  or  printed,  by  any  person  who 
makes,  signs,  issues,  sells,  removes,  consigns,  or  ships 
the  same,  or  for  whose  use  or  benefit  the  same  are 
made,  signed,  issued,  sold,  removed,  consigned,  or 
shipped,  the  several  taxes  specified  in  such  schedule. 
The  taxes  imposed  by  this  section  shall,  in  the  case 
of  any  article  upon  which  a  corresponding  stamp  tax 
is  now  imposed  by  law,  be  in  Ueu  of  such  tax. 

Sec.  1101.  That  there  shall  not  be  taxed  under 
this  title  any  bond,  note,  or  other  instrument,  issued 
by  the  United  States,  or  by  any  foreign  Govern- 
ment, or  by  any  State,  Territory,  or  the  District  of 
Columbia,  or  local  subdivision  thereof,  or  municipal 
or  other  corporation  exercising  the  taxing  power;  or 
any  bond  of  indemnity  required  to  be  filed  by  any 
person  to  secure  payment  of  any  pension,  allowance, 
allotment,  rehef,  or  insurance  by  the  United  States; 
or  stocks  and  bonds  issued  by  cooperative  building 
and  loan  associations  which  are  organized  and  oper- 
ated exclusively  for  the  benefit  of  their  members 
and  make  loans  only  to  their  shareholders,  or  by 
mutual  ditch  or  irrigating  companies. 

170 


Stamp   Taxes  171 

Sec.  1102.    That  whoever— 

(a)  Makes,  signs,  issues,  or  accepts,  or  causes  to  Pemliy  for  non- 
I  be  made,  signed,  issued,  or  accepted,  any  instrument,  p*^™®"*  ®'  *" 

document,  or  paper  of  any  kind  or  description  what- 
soever without  the  full  amount  of  tax  thereon  being 
duly  paid; 

(b)  Consigns  or  ships,  or  causes  to  be  consigned 
or  shipped,  by  parcel  post  any  parcel,  package,  or 
article  without  the  full  amount  of  tax  being  duly 
paid ; 

(c)  Manufactures  or  imports  and  sells,  or  offers 
for  sale,  or  causes  to  be  manufactured  or  imported 
and  sold,  or  offered  for  sale,  any  playing  cards, 
package,  or  other  article  without  the  full  amount  of 
tax  being  duly  paid; 

(d)  Makes  use  of  any  adhesive  stamp  to  denote 
any  tax  imposed  by  this  title  without  cancelling  or 
obliterating  such  stamp  as  prescribed  in  section 
1104; 

Is  guilty  of  a  misdemeanor  and  upon  convic- 
tion thereof  shall  pay  a  fine  of  not  more  than  $100 
for  each  oflFense. 

Sec.  1103.    That  whoever — 

(a)  Fraudulently  cuts,  tears,  or  removes  from  Penally  for  fraudulent 
any  vellum,  parchment,  paper,  instrument,  writing,  ""*"*®  ®'  •'^"p* 
package,  or  article,  upon  which  any  tax  is  imposed 
by  this  title,  any  adhesive  stamp  or  the  impression 
of  any  stamp,  die,  plate,  or  other  article  provided, 
made,  or  used  in  pursuance  of  this  title; 

(b)  Fraudulently  uses,  joins,  fixes,  or  places  to, 
with,  or  upon  any  vellum,  parchment,  paper,  instru- 
ment, writing,  package,  or  article,  upon  which  any 
tax  is  imposed  by  this  title,  ( 1 )  any  adhesive  stamp, 
or  the  impression  of  any  stamp,  die,  plate,  or  other 
article,  which  has  been  cut,  torn,  or  removed  from 
any  other  vellum,  parchment,  paper,  instrument, 
writing,  package,  or  article,  upon  which  any  tax  is 


ITt 


REYEirnE   Act 


imposed  by  this  title;  or  (2)  any  adhesive  stamp 
or  the  impression  of  any  stamp,  die,  plate,  or  other 
article  of  insufficient  value;  or  (3)  any  forged  or 
counterfeit  stamp,  or  the  impression  of  any  forged 
or  counterfeited  stamp,  die,  plate,  or  other  article; 

(c)  Willfully  removes,  or  alters  the  cancellation, 
or  defacing  marks  of,  or  otherwise  prepares,  any  ad- 
hesive stamp,  with  intent  to  use,  or  cause  the  same 
to  be  used,  after  it  has  been  already  used,  or  know- 
ingly or  willfully  buys,  sells,  offers  for  sale,  or  gives 
away,  any  such  washed  or  restored  stamp  to  any 
person  for  use,  or  knowingly  uses  the  same ; 

(d)  Knowingly  and  without  lawful  excuse  (the 
burden  of  proof  of  such  excuse  being  on  the  ac- 
cused) has  in  possession  any  washed,  restored,  or 
altered  stamp,  which  has  been  removed  from  any 
vellum,  parchment,  paper,  instrument,  writing, 
package,  or  article; 

Is  guilty  of  a  misdemeanor,  and  upon  conviction 
shall  be  punished  by  a  fine  of  not  more  than  $1,000, 
or  by  imprisonment  for  not  more  than  five  years,  or 
both,  and  any  such  reused,  cancelled,  or  counterfeit 
stamp  and  the  vellum,  parchment,  document,  paper, 
package,  or  article  upon  which  it  is  placed  or  im- 
pressed shall  be  forfeited  to  the  United  States. 

Sec.  1104.  That  whenever  an  adhesive  stamp  is 
used  for  denoting  any  tax  imposed  by  this  title,  ex- 
cept as  hereinafter  provided,  the  person  using  or 
affixing  the  same  shall  write  or  stamp  or  cause  to  be 
written  or  stamped  thereupon  the  initials  of  his  or 
its  name  and  the  date  upon  which  the  same  is  at- 
tached or  used,  so  that  the  same  may  not  again  be 
used;  Provided,  That  the  Commissioner  may  pre- 
scribe such  other  method  for  the  cancellation  of 
such  stamps  as  he  may  deem  expedient. 
Preparation  and  Sec.   1105.     (a)     That  thc  Commissioucr  shall 

distribution  of  stamps   causc  to  bc  prepared  and  distributed  for  the  pay- 


Cancellation  of 
stamps 


Stamp   Taxes  IW 

ment  of  the  taxes  prescribed  in  this  title  suitable 
stamps  denoting  the  tax  on  the  document,  articles, 
or  thing  to  which  the  same  may  be  affixed,  and  shall 
prescribe  such  method  for  the  affixing  of  said  stamps 
in  substitution  for  or  in  addition  to  the  method  pro- 
vided in  this  title,  as  he  may  deem  expedient. 

(b)  The  Commissioner,  with  the  approval  of  the 
Secretary,  is  authorized  to  procure  any  of  the 
stamps  provided  for  in  this  title  by  contract  when- 
ever such  stamps  can  not  be  speedily  prepared  by 
the  Bureau  of  Engraving  and  Printing;  but  this 
authority  shall  expire  on  January  1,  1920,  except 
as  to  imprinted  stamps  furnished  under  contract, 
authorized  by  the  Commissioner. 

(c)  All  internal-revenue  laws  relating  to  the  as-  Extension  of 
sessment  and  collection  of  taxes  are  hereby  extended  '«^®""«  '*^* 
to  and  made  a  part  of  this  title,  so  far  as  applicable, 

for  the  purpose  of  collecting  stamp  taxes  omitted  ^ 

through  mistake  or  fraud  from  any  instrument, 
document,  paper,  writing,  parcel,  package,  or  article 
named  herein. 

Sec.  1106.  That  the  Commissioner  shall  furnish  Sale  of  stamps 
to  the  Postmaster  General  without  prepayment  a  >tp®»to^>«« 
suitable  quantity  of  adhesive  stamps  to  be  distrib- 
uted to  and  kept  on  sale  by  the  various  postmasters 
in  the  United  States.  The  Postmaster  General  mav 
require  each  such  postmaster  to  give  additional  or 
increased  bond  as  postmaster  for  the  value  of  the 
stamps  so  furnished,  and  each  such  postmaster  shall 
deposit  the  receipts  from  the  sale  of  such  stamps  to 
the  credit  of  and  render  accounts  to  the  Postmaster 
General  at  such  times  and  in  such  form  as  he  may  by 
regulations  prescribe.  The  Postmaster  General 
shall  at  least  once  monthly  transfer  all  collections 
from  this  source  to  the  Treasury  as  internal-revenue 
collections. 


k 


174 


RiTEKUB   Act 


Sale  by  Asnstant 
Treasurer  and 
designated 
depositaries 


Bonds,  issue  of,  or 
renewal 


Rate,  5c  per  $100 


Indemnity  and 
surety  bonds,  and 
fidelity  or  guarantee 
policies,  tax  50c 


Sec.  1107.  That  the  collectors  of  the  several  dis- 
tricts shall  furnish  without  prepayment  to  any  as- 
sistant treasurer  or  designated  depositary  of  the 
United  States  located  in  their  respective  collection 
districts  a  suitable  quantity  of  adhesive  stamps  for 
sale.  In  such  cases  the  collector  may  require  a  bond, 
with  sufficient  sureties,  to  an  amount  equal  to  the 
value  of  the  adhesive  stamps  so  furnished,  condi- 
tioned for  the  faithful  return,  whenever  so  required, 
of  all  quantities  or  amounts  undisposed  of,  and  for 
the  payment  monthly  of  all  quantities  or  amounts 
sold  or  not  remaining  on  hand.  The  Secretary  may 
from  time  to  time  make  such  regulations  as  he  may 
find  necessary  to  insure  the  safekeeping  or  prevent 
the  illegal  use  of  all  such  adhesive  stamps. 

Schedule  A. — Stamp  Taxes. 

1.  Bonds  of  indebtedness:  On  all  bonds,  deben- 
tures, or  certificates  of  indebtedness  issued  by  any 
person,  and  all  instruments,  however  termed,  issued 
by  any  corporation  with  interest  coupons  or  in  regis- 
tered form,  known  generally  as  corporate  securities, 
on  each  $100  of  face  value  or  fraction  thereof,  5 
cents;  Provided,  That  every  renewal  of  the  fore- 
going shall  be  taxed  as  a  new  issue;  Provided 
further.  That  when  a  bond  conditioned  for  the  re- 
payment or  payment  of  money  is  given  in  a  penal 
sum  greater  than  the  debt  secured,  the  tax  shall  be 
based  upon  the  amount  secured. 

2.  Bonds,  indemnity  and  surety:  On  all  bonds 
executed  for  indemnifying  any  person  who  shall 
have  become  bound  or  engaged  as  surety,  and  on  all 
bonds  executed  for  the  due  execution  or  perform- 
ance of  any  contract,  obligation  or  requirement,  or 
the  duties  of  any  office  or  position,  and  to  account 
for  money  received  by  virtue  thereof,  and  on  all 
policies  of  guaranty  and  fideUty  insurance,  includ- 


Stamp   Taxes  170 

ing  policies  guaranteeing  titles  to  real  estate  and 
mortgage  guarantee  policies,  and  on  all  other  bonds 
of  any  description,  made,  issued,  or  executed,  not 
otherwise  provided  for  in  this  schedule,  except  such 
as  may  be  required  in  legal  proceedings,  50  cents ;  Rates,  soc,  or  ic  per 
Provided,  That  where  a  premium  is  charged  for  the  $i «'  premium 
issuance,  execution,  renewal  or  continuance  of  such 
bond  the  tax  shall  be  1  cent  on  each  dollar  or  frac- 
tional part  thereof  of  the  premium  charged;  Pro- 
vided further.  That  policies  of  reinsurance  shall  be  Reinsurance  exempt 
exempt  from  the  tax  imposed  by  this  subdivision. 

3.  Capital  stock,  issue:  On  each  original  issue,  Capital  stock,  issue 
whether  on  organization  or  reorganization,  of  cer-  "'»  '**®  ^'  p*'  ^^®® 
tificates  of  stock,  or  of  profits,  or  of  interest  in  prop- 
erty or  accumulations,  by  any  corporation,  on  each 
$100  of  face  value  or  fraction  thereof,  5  cents;  Pro- 
vided, That  where  a  certificate  is  issued  without  face 
value,  the  tax  shall  be  5  cents  per  share,  unless  the 
actual  value  is  in  excess  of  $100  per  share,  in  which 
case  the  tax  shall  be  5  cents  on  each  $100  of  actual 
value  or  fraction  thereof. 

The  stamps  representing  the  tax  imposed  by  this  Stamps  affixed  to 
subdivision  shall  be  attached  to  the  stock  books  and  **^^  ^*^^» 
not  to  the  certificates  issued. 

4.  Capital  stock,  sales  or  transfers :  On  all  sales,  stock,  sales  or 
or  agreements  to  sell,  or  memoranda  of  sales  or  de-  transfers 
liveries  of,  or  transfers  of  legal  title  to  shares  or  cer- 
tificates of  stock  or  of  profits  or  of  interest  in  prop- 
ety  or  accumulations  in  any  corporation,  or  to  rights 
to  subscribe  for  or  to  receive  such  shares  or  certifi- 
cates, whether  made  upon  or  shown  by  the  books  of 
the  corporation,  or  by  any  assignment  in  blank,  or 
by  any  delivery,  or  by  any  paper  or  agreement  or 
memorandum  or  other  evidence  of  transfer  or  sale, 
whether  entitling  the  holder  in  any  manner  to  the 
benefit  of  such  stock,  interest,  or  rights,  or  not,  on 
each  $100  of  face  value  or  fraction  thereof,  2  cents.  Rate,  2c  per  $ioo 


176 


Reyekue   Act 


Exceptions: 

(1)  Deposit  of  stock 

as  collateral 


sale 


and  where  such  shares  are  without  par  or  face  value, 
the  tax  shall  be  2  cents  on  the  transfer  or  sale  or 
agreement  to  sell  on  each  share,  unless  the  actual 
value  thereof  is  in  excess  of  $100  per  share,  in  which 
case  the  tax  shall  be  2  cents  on  each  $100  of  actual 
value  or  fraction  thereof;  Provided,  That  it  is  not 
intended  by  this  title  to  impose  a  tax  upon  an  agree- 
ment evidencing  a  deposit  of  certificates  as  collateral 
security  for  money  loaned  thereon,  which  certificates 
are  not  actually  sold,  nor  upon  the  delivery  or  trans- 
fer for  such  purpose  of  certificates  so  deposited; 
Provided  further,  That  the  tax  shall  not  be  imposed 
(2)  Transfer  to  broker  upou  deliveries  or  trausf crs  to  a  broker  for  sale,  nor 

upon  deliveries  or  transfers  by  a  broker  to  a  cus- 
tomer for  whom  and  upon  whose  order  he  has  pur- 
chased same,  but  such  deliveries  or  transfers  shall  be 
accompanied  by  a  certificate  setting  forth  the  facts ; 
Provided  further,  That  in  case  of  sale  where  the 
evidence  of  transfer  is  shown  only  by  the  books  of 
the  corporation  the  stamp  shall  be  placed  upon  such 
books;  and  where  the  change  of  ownership  is  by 
transfer  of  the  certificate  the  stamp  shall  be  placed 
upon  the  certificate;  and  in  cases  of  an  agreement 
to  sell  or  where  the  transfer  is  by  delivery  of  the  cer- 
tificate assigned  in  blank  there  shall  be  made  and 
delivered  by  the  seller  to  the  buyer  a  bill  or  memo- 
randum of  such  sale,  to  which  the  stamp  shall  be 
affixed;  and  every  bill  or  memorandum  of  sale  or 
agreement  to  sell  before  mentioned  shall  show  the 
date  thereof,  the  name  of  the  seller,  the  amount  of 
the  sale,  and  the  matter  or  thing  to  which  it  refers. 
Any  person  liable  to  pay  the  tax  as  herein  provided, 
or  anyone  who  acts  in  the  matter  as  agent  or  broker 
for  such  person,  who  makes  any  such  sale,  or  who  in 
pursuance  of  any  such  sale  delivers  any  certificate 
or  evidence  of  the  sale  of  any  stock,  interest  or  right, 
or  biU  or  memorandum  thereof,  as  herein  required. 


Stamps,  where 
affixed 


Penalties 


Stamp   Taxes  177 

without  having  the  proper  stamps  ajfiixed  thereto 
with  intent  to  evade  the  foregoing  provisions,  shall 
be  deemed  guilty  of  a  misdemeanor,  and  upon  con- 
viction thereof  shall  pay  a  fine  of  not  exceeding 
$1,000,  or  be  imprisoned  not  more  than  six  months, 
or  both. 

5,    Produce,  sales  of,  on  exchange:    Upon  each  Sales  on  produce 
sale,  agreement  of  sale,  or  agreement  to  sell  (not  «"*»*"«• 
including  so-called  transferred  or  scratch  sales), 
any  products  or  merchandise  at,  or  under  the  rules 
or  usages  of,  any  exchange,  or  board  of  trade,  or 
other  similar  place,  for  future  delivery,  for  each 
$100  in  value  of  the  merchandise  covered  by  said  For  future  deiifery, 
sale  or  agreement  of  sale  or  agreement  to  sell,  2  *a»2cper$ioo 
cents,  and  for  each  additional  $100  or  fractional  part 
thereof  in  excess  of  $100,  2  cents;  Provided,  That  Stamps  to  be  affixed 
on  every  sale  or  agreement  of  sale  or  agreement  to  *®"®™®'^*"  ao  sae 
sell  as  aforesaid  there  shall  be  made  and  delivered 
by  the  seller  to  the  buyer  a  bill,  memorandum,  agree- 
ment, or  other  evidence  of  such  sale,  agreement  of 
sale,  or  agreement  to  sell,  to  which  there  shall  be 
affixed  a  lawful  stamp  or  stamps  in  value  equal  to 
the  amount  of  the  tax  on  such  sale;  Provided  fur-  Transfers  of  contracts 
ther.  That  sellers  of  commodities  described  herein,  **  ci^aring-house  not 

a  sale 

having  paid  the  tax  provided  by  this  subdivision, 
may  transfer  such  contracts  to  a  clearing-house  cor- 
poration or  association,  and  such  transfer  shall  not 
be  deemed  to  be  a  sale,  or  agreement  of  sale,  or  an 
agreement  to  sell  within  the  provisions  of  this  Act, 
provided  that  such  transfer  shall  not  vest  any  bene- 
ficial interest  in  such  clearing-house  association  but 
shall  be  made  for  the  sole  purpose  of  enabling  such 
clearing-house  association  to  adjust  and  balance 
the  accounts  of  the  members  of  such  clearing-house 
association  on  their  several  contracts.  Every  such 
bill,  memorandum,  or  other  evidence  of  sale  or 
agreement  to  sell  shall  show  the  date  thereof,  the 


178 


Revenue   A  ct 


Penalty 


Sales  for  immediate 
delivery  not  taxed 


Promissory  notes  and 
time  drafts 


Rates,  2c  per  $100 


Exemption  of  notes 
secured  by  U.  S. 
war  obligations,  or 
by  notes  so  secured 


name  of  the  seller,  the  amount  of  the  sale,  and  the 
matter  or  thing  to  which  it  refers ;  and  any  person 
hable  to  pay  the  tax  as  herein  provided,  or  anyone 
who  acts  in  the  matter  as  agent  or  broker  for  such 
person,  who  makes  any  such  sale  or  agreement  of 
sale,  or  agi'eement  to  sell,  or  who,  in  pursuance  of 
any  such  sale,  agreement  of  sale  or  agreement  to 
sell,  delivers  any  such  products  or  merchandise 
without  a  bill,  memorandum,  or  other  evidence 
thereof  as  herein  required,  or  who  delivers  such  bill, 
memorandum,  or  other  evidence  of  sale,  or  agi*ee- 
ment  to  sell,  without  having  the  proper  stamps  af- 
fixed thereto,  with  intent  to  evade  the  foregoing 
provisions,  shall  be  deemed  guilty  of  a  misdemeanor, 
and  upon  conviction  thereof  shall  pay  a  fine  of  not 
exceeding  $1,000  or  be  imprisoned  not  more  than 
six  months,  or  both. 

No  bill,  memorandum,  agreement,  or  other  evi- 
dence of  such  sale,  or  agreement  of  sale,  or  agree- 
ment to  sell,  in  case  of  cash  sales  of  products  or  mer- 
chandise for  immediate  or  prompt  delivery  which 
in  good  faith  are  actually  intended  to  be  delivered 
shall  be  subject  to  this  tax. 

6.  Drafts  or  checks  (payable  otherwise  than  at 
sight  or  on  demand)  upon  their  acceptance  or  deliv- 
ery within  the  United  States  whichever  is  prior, 
promissory  notes,  except  bank  notes  issued  for  cir- 
culation, and  for  each  renewal  of  the  same,  for  a 
siun  not  exceeding  $100,  2  cents;  and  for  each  addi- 
tional $100  or  fractional  part  thereof,  2  cents. 

This  subdivision  shall  not  apply  to  a  promissory 
note  secured  by  the  pledge  of  bonds  or  obligations 
of  the  United  States  issued  after  April  24,  1917,  or 
secured  by  the  pledge  of  a  promissory  note  which 
itself  is  secured  by  the  pledge  of  such  bonds  or  obli- 
gations ;  Provided,  That  in  either  case  the  par  value 


Stamp   Taxes  \19 

of  such  bonds  or  obligations  shall  be  not  less  than 
the  amount  of  such  note. 

7.  Conveyances:    Deed,  instrument,  or  writing,  Conveyances 
whereby  any  lands,  tenements,  or  other  realty  sold 

shall  be  granted,  assigned,  transferred,  or  otherwise 
conveyed  to  or  vested  in,  the  purchaser  or  purchas- 
ers, or  any  other  person  or  persons,  by  his,  her,  or 
their  direction,  when  the  consideration  or  value  of 
the  interest  or  property  conveyed,  exclusive  of  the 
value  of  any  hen  or  encumbrance  remaining  thereon 
at  the  time  of  sale,  exceeds  $100  and  does  not  exceed  Raic» 
$500,  50  cents ;  and  for  each  additional  $500  or  frac- 
tional part  thereof,  50  cents.  This  subdivision  shall 
not  apply  to  any  instrument  or  writing  given  to 
secure  a  debt. 

8.  Entry  of  any  goods,  wares,  or  merchandise  Customhouse  entries 
at  any  customhouse,  either  for  consumption  or  ware- 
housing, not  exceeding  $100  in  value,  25  cents;  ex-  Rates 
ceeding  $100  and  not  exceeding  $500  in  value,  50 

cents ;  exceeding  $500  in  value,  $1. 

9.  Entry  for  the  withdrawal  of  any  goods  or  mer-  Entries  for  with- 
chandise  from  customs  bonded  warehouse,  50  cents. 

10.  Passage  ticket,  one  way  or  round  trip,  for  Passage  tickets 
each  passenger,  sold  or  issued  in  the  United  States 

for  passage  by  any  vessel  to  a  port  or  place  not  in 
the  United  States,  Canada,  or  Mexico,  if  costing  not  ^*'®* 
exceeding  $30,  $1 ;  costing  more  than  $30  and  not 
exceeding  $60,  $3 ;  costing  more  than  $60,  $5.  This 
subdivision  shall  not  apply  to  passage  tickets  cost- 
ing $10  or  less. 

11.  Proxy  for  voting  at  any  election  for  officers,  ^roide% 
or  meeting  for  the  transaction  of  business,  of  any 
corporation,  except  religious,  educational,  charita- 
ble, fraternal,  or  literary  societies,  or  public  ceme- 
teries, 10  cents. 

12.  Power  of  attorney  granting  authority  to  do  Powers  of  attorney 
or  perform  some  act  for  or  in  behalf  of  the  grantor, 


180  RevenueAct 

which  authority  is  not  otherwise  vested  in  the 
grantee,  25  cents.  This  subdivision  shall  not  apply 
to  any  papers  necessary  to  be  used  for  the  collection 
of  claims  from  the  United  States  or  from  any  State 
for  pensions,  back  pay,  bounty,  or  for  property  lost 
in  the  mihtary  or  naval  service,  or  to  powers  of  at- 
torney required  in  bankruptcy  cases. 

Playing  cards  13.  Playing  cards:   Upon  every  pack  of  playing 

cards  containing  not  more  than  fifty-four  cards, 
manufactured  or  imported,  and  sold,  or  removed 
for  consumption  or  sale,  a  tax  of  8  cents  per  pack. 

Parcel  post  packages        14.  Parccl-post  packagcs :  Upon  every  parcel  or 

package  transported  from  one  point  in  the  United 
States  to  another  by  parcel  post  on  which  the  post- 
age amounts  to  25  cents  or  more,  a  tax  of  1  cent  for 
each  25  cents  or  fractional  part  thereof  charged  for 
such  transportation,  to  be  paid  by  the  consignor. 

No  such  parcel  or  package  shall  be  transported 
until  a  stamp  or  stamps  representing  the  tax  due 
shall  have  been  aiiixed  thereto. 

Policies  and  renewals       15.  On  cach  policy  of  insuraucc,  or  certificate, 

of  property  insurance  binder,  covcring  notc,  memorandum,  cablegram,  let- 
ter, or  other  instrument  by  whatever  name  called 
whereby  insurance  is  made  or  renewed  upon  prop- 
erty within  the  United  States  (including  rents  and 
profits)  against  peril  by  sea  or  on  inland  waters  or 
in  transit  on  land  (including  transshipments  and 
storage  at  termini  or  way  points)  or  by  fire,  light- 
ning, tornado,  wind-storm,  bombardment,  invasion, 
insurrection  or  riot,  issued  to  or  for  or  in  the  name  of 
a  domestic  corporation  or  partnership  or  an  indi- 
vidual resident  of  the  United  States  by  any  foreign 
corporation  or  partnership  or  any  individual  not  a 
resident  of  the  United  States,  when  such  policy  or 
other  instrument  is  not  signed  or  countersigned  by 
an  officer  or  agent  of  the  insurer  in  a  State,  Terri- 
tory, or  district  of  the  United  States  within  which 


S  T  A  M  P     T  A  X  E  8  181 

such  insurer  is  authorized  to  do  business,  a  tax  of 
3  cents  on  each  dollar  or  fractional  part  thereof  of 
the  premium  charged;  Provided,  That  policies  of 
re-insurance  shall  be  exempt  from  the  tax  imposed 
by  this  subdivision. 

Any  person  to  or  for  whom  or  in  whose  name  any  By  whom  stamp  is 
such  poUcy  or  other  instrument  is  issued,  or  any  lo  be  affixed 
solicitor  or  broker  acting  for  or  on  behalf  of  such 
person  in  the  procurement  of  any  such  policy  or 
other  instrument,  shall  affix  the  proper  stamps  to 
such  policy  or  other  instrument,  and  for  failure  to 
affix  such  stamps  with  intent  to  evade  the  tax  shall, 
in  addition  to  other  penalties  provided  therefor,  pay 
a  fine  of  double  the  amount  of  the  tax. 


Tax  on  employers  of 
child  labbr,  operating: 


Mines  or  quarries 


Mills  or  factories 


What  constitutes 
child  labor 


Tax  rate,  10  per  cent 
of  net  profits 


Computation  of  net 
profits 


Deductions: 


TITLE  XII 

# 

Tax  on  Employment  of  Child  Labor 

Sec.  1200.  That  every  person  (other  than  a  bona 
fide  boys'  or  girls'  canning  club  recognized  by  the 
Agricultural  Department  of  a  State  and  of  the 
United  States)  operating  (a)  any  mine  or  quarry 
situated  in  the  United  States  in  which  children  un- 
der the  age  of  sixteen  years  have  been  employed  or 
permitted  to  work  during  any  portion  of  the  taxable 
year;  or  (b)  any  mill,  cannery,  workshop,  factory, 
or  manufacturing  establishment  situated  in  the 
United  tates  in  which  children  under  the  age  of 
fourteen  years  have  been  employed  or  permitted  to 
work,  or  children  between  the  ages  of  fourteen  and 
sixteen  have  been  employed  or  permitted  to  work 
more  than  eight  hours  in  any  day  or  more  than 
six  days  in  any  week,  or  after  the  hour  of  seven 
o'clock  post  meridian,  or  before  the  hour  of  six 
o'clock  ante  meridian,  during  any  portion  of  the 
taxable  year,  shall  pay  for  each  taxable  year,  in  ad- 
dition to  all  other  taxes  imposed  by  law,  an  excise 
tax  equivalent  to  10  per  centum  of  the  entire  net 
profits  received  or  accrued  for  such  year  from  the 
sale  or  disposition  of  the  product  of  such  mine, 
quarry,  mill,  cannery,  workshop,  factory,  or  manu- 
facturing establishment. 

Sec.  1201.  That  in  computing  net  profits  under 
the  provisions  of  this  title,  for  the  purpose  of  the  tax 
there  shall  be  allowed  as  deductions  from  the  gross 
amount  received  or  accrued  for  the  taxable  year 
from  the  sale  or  disposition  of  such  products  manu- 

182 


Employment   of   Child   Labor  183 

factured  within  the  United  States  the  following 
items : 

(a)  The  cost  of  raw  materials  entering  into  the  Raw  materials 
production; 

(b)  Running  expenses,  including  rentals,  cost  of  Expense*  of  business 
repairs,  and  maintenance,  heat,  power,  insurance, 
management,  and  a  reasonable  allowance  for  sala- 
ries or  other  compensations  for  personal  services  ac- 
tually rendered,  and  for  depreciation ; 

(c)  Interest  paid  within  the  taxable  year  on  interest  paid 
debts  or  loans  contracted  to  meet  the  needs  of  the 
business,  and  the  proceeds  of  which  have  been  ac- 
tually used  to  meet  such  needs ; 

(d)  Taxes  of  all  kinds  paid  during  the  taxable  Taxes 
year  with  respect  to  the  business  or  property  relat- 
ing to  the  production ;  and 

(e)  Losses  actually  sustained  within  the  taxable  Losses 
year  in  connection  with  the  business  of  producing 
such  products,  including  losses  from  fire,  flood, 
storm,  or  other  casualties,  and  not  compensated  for 

by  insurance  or  otherwise. 

Sec.  1202.  That  if  any  such  person  during  any  Sales  below  fair 
taxable  year  or  part  thereof,  whether  under  any  market  price  to  be 
agreement,  arrangement,  or  understanding  or  oth-  ^J7^ir*^ricr  *"* 
erwise,  sells  or  disposes  of  any  product  of  such  mine, 
quarry,  mill,  cannery,  workshop,  factory,  or  manu- 
facturing establishment  at  less  than  the  fair  market 
price  obtainable  therefor  either  (a)  in  such  manner 
as  directly  or  indirectly  to  benefit  such  person  or 
any  person  directly  or  indirectly  interested  in  the 
business  of  such  person;  or  (b)  with  intent  to  cause 
such  benefit;  the  gross  amount  received  or  accrued 
for  such  year  or  part  thereof  from  the  sale  or  dis- 
position of  such  product  shall  be  taken  to  be  the 
amount  which  would  have  been  received  or  accrued 
from  the  sale  or  disposition  of  such  product  if  sold 
at  the  fair  market  price. 


184 


Re VE N UE   Act 


Certificates  of  age 


Federal  board 


Penalty  for  false 
statement 


State  certificates 
acceptable 


Mistakes  of  fact 
without  intention  to 
evade 


Returns 


Sec.  1203.  (a)  That  no  person  subject  to  the 
provisions  of  this  title  shall  be  liable  for  the  tax 
herein  imposed  if  the  only  employment  or  permis- 
sion to  work  which  but  for  this  section  would  subject 
him  to  the  tax,  has  been  of  a  child  as  to  whom  such 
person  has  in  good  faith  procured  at  the  time  of 
employing  such  child  or  permitting  him  to  work, 
and  has  since  in  good  faith  relied  upon  and  kept 
on  file  a  certificate,  issued  in  such  form,  under 
such  conditions  and  by  such  persons  as  may  be  pre- 
scribed by  a  board  consisting  of  the  Secretary,  the 
Commissioner,  and  the  Secretary  of  Labor,  showing 
the  child  to  be  of  such  age  as  not  to  subject  such  per- 
son to  the  tax  imposed  by  this  title.  Any  person 
who  knowingly  makes  a  false  statement  or  presents 
false  evidence  in  or  in  relation  to  any  such  certificate 
or  application  therefor  shall  be  punished  by  a  fine 
of  not  less  than  $100,  nor  more  than  $1,000,  or  by 
imprisonment  for  not  more  than  three  months,  or  by 
both  such  fine  and  imprisonment,  in  the  discretion 
of  the  court. 

In  any  State  designated  by  such  board  an  em- 
ployment certificate  or  other  similar  paper  as  to  the 
age  of  the  child,  issued  under  the  laws  of  that  State, 
and  not  inconsistent  with  the  provisions  of  this  title, 
shall  have  the  same  force  and  effect  as  a  certificate 
herein  provided  for. 

(b)  The  tax  imposed  by  this  title  shall  not  be 
imposed  in  the  case  of  any  person  who  proves  to  the 
satisfaction  of  the  Secretary  that  the  only  employ- 
ment or  peimission  to  work  which  but  for  this  sec- 
tion would  subject  him  to  the  tax,  has  been  of  a  child 
employed  or  permitted  to  work  under  a  mistake  of 
fact  as  to  the  age  of  such  child,  and  without  inten- 
tion to  evade  the  tax. 

Sec.  1204.  That  on  or  before  the  first  day  of  the 
third  month  following  the  close  of  each  taxable  year, 


Emplotmbkt   OF   Child  LABok  185 

a  true  and  accurate  return  under  oath  shall  be  made 
by  each  person  subject  to  the  provisions  of  this  title 
to  the  collector  for  the  district  in  which  such  person 
has  his  principal  office  or  place  of  business,  in  such 
form  as  the  Commissioner,  with  the  approval  of  the 
Secretary,  shall  prescribe,  setting  forth  specifically 
the  gross  amount  of  income  received  or  accrued  dm*- 
ing  such  year  from  the  sale  or  disposition  of  the 
product  of  any  mine,  quarry,  mill,  cannery,  work- 
shop, factory,  or  manufacturing  estabhshment,  in 
which  children  have  been  employed  subjecting  him 
to  the  tax  imposed  by  this  title,  and  from  the  total 
thereof  deducting  the  aggregate  items  of  allowance 
authorized  by  this  title,  and  such  other  particulars 
as  to  the  gross  receipts  and  items  of  allowance  as  the 
w  Commissioner,  with  the  approval  of  the  Secretary 
may  require. 

Sec.  1205.  That  all  such  returns  shall  be  trans-  Assessment  and 
mitted  forthwith  by  the  collector  to  the  Commis-  payment  of  tax 
sioner,  who  shall,  as  soon  as  practicable,  assess  the 
tax  found  due  and  notify  the  person  making  such 
return  of  the  amount  of  tax  for  which  such  person 
is  liable,  and  such  person  shall  pay  the  tax  to  the 
collector  on  or  before  thirty  days  from  the  date  of 
such  notice. 

Sec.  1206.  That  for  the  purposes  of  this  Act  the  inspection 
Commissioner,  or  any  other  person  duly  authorized 
by  him,  shall  have  authority  to  enter  and  inspect  at 
any  time  any  mine,  quarry,  mill,  cannery,  workshop, 
factory,  or  manufacturing  establishment.  The  Sec- 
retary of  Labor,  or  any  person  duly  authorized  by 
him,  shall,  for  the  purpose  of  complying  with  a  re- 
quest of  the  Commissioner  to  make  such  an  inspec- 
tion, have  like  authority,  and  shall  make  report  to 
the  Commissioner  of  inspections  made  under  such 
authority  in  such  form  as  may  be  prescribed  by  the 


186 


Revenue   Act 


Penalty 


Taxable  year 
defined 

See  page  8 


Commissioner  with  the  approval  of  the  Secretary 
of  the  Treasury. 

Any  person  who  refuses  or  obstructs  entry  or  in- 
spe<3tion  authorized  by  this  section  shall  be  punished 
by  a  fine  of  not  more  than  $1,000,  or  by  imprison- 
ment for  not  more  than  one  year,  or  both  such  fine 
and  imprisonment. 

Sec.  1207.  That  as  used  in  this  title  the  term 
"taxable  year"  shall  have  the  same  meaning  as  pro- 
vided for  the  purposes  of  income  tax  in  section  200. 
The  first  taxable  year  for  the  purposes  of  this  title 
shall  be  the  period  between  sixty  days  after  the  pas- 
sage of  this  Act  and  December  31,  1919,  both  inclu- 
sive, or  such  portion  of  such  period  as  is  included 
within  the  fiscal  year  (as  defined  in  section  200)  of 
the  taxpayer. 


TITLE  XIII. 

General  Administrative  Provisions 

Sec.  1300.  That  hereafter  the  salary  of  the  Com-  Salary  of 
missioner  shall  be  $10,000  a  year.  The  difference  Commissioner 
between  the  amount  appropriated  under  existing 
law  and  the  salary  herein  established  shall,  for  the 
period  between  the  passage  of  this  Act  and  July  1, 
1919,  be  paid  out  of  the  appropriations  for  collect- 
ing internal  revenue. 

Sec.  1301.  (a)  That  hereafter  there  may  be  em-  Deputy 
ployed  in  the  Bureau  of  Internal  Revenue,  in  lieu  commissioners 
of  the  deputy  commissioners  whose  salaries  are  now 
fixed  by  law,  five  deputy  commissioners  and  an  as- 
sistant to  the  Commissioner,  who  shall  each  receive 
a  salary  of  $5,000  a  year,  payable  monthly.  The  as- 
sistant to  the  Commissioner  may  be  authorized  by 
the  Commissioner  to  perform  any  duties  which  the 
deputy  conmiissioners  may  perform  undei^  existing 
law. 

(b)  The  salaries  of  collectors  may  be  readjusted  Salaries  of  collectors 
and  increased  under  such  regulations  as  may  be  pre- 
scribed by  the  Commissioner,  subject  to  the  ap- 
proval of  the  Secretary,  but  no  collector  shall  re- 
ceive a  salary  in  excess  of  $6,000  a  year. 

(c)  There  is  hereby  appropriated,  out  of  any  Appropriation  for 
money  in  the  Treasury  not  otherwise  appropriated,  expenses  of  collecting 
for  the  fiscal  year  ending  June  30,  1919,  the  sum  **^ 

of  $7,500,000  for  the  expenses  of  assessing  and  col- 
lecting the  internal-revenue  taxes  as  provided  in 
this  Act,  including  the  employment  of  necessary    ' 
officers,    attorneys,    experts,    agents,    inspectors, 

187 


168 


Revenue    Act 


Advisory  Tax  Board 


Duration 


Vacancies 


Chairman 
Salary 


Duties 


deputy  collectors,  clerks,  janitors,  and  messengers, 
in  the  District  of  Columbia  and  the  several  collec- 
tion districts,  to  be  appointed  as  provided  by  law, 
telegraph  and  telephone  service,  rental  and  repair 
of  quarters,  postage,  and  the  purchase  of  such  sup- 
plies, equipment,  furniture,  mechanical  devices, 
printing,  stationery,  law  books  and  books  of  refer- 
ence, not  to  exceed  $500  for  street  car  fares  in  the 
District  of  Columbia,  and  such  other  articles  as  may 
be  necessary  for  use  in  the  District  of  Columbia 
and  the  several  collection  districts ;  Provided,  That 
not  more  than  $2,750,000  of  the  total  amount  ap- 
propriated by  this  section  may  be  expended  in  the 
Bureau  of  Internal  Revenue,  in  the  District  of 
Columbia. 

(d)  (1)  There  is  hereby  created  a  Board  to  be 
known  as  the  "Advisory  Tax  Board,"  hereinafter 
called  the  Board,  and  to  be  composed  of  not  to  ex- 
ceed six  members  to  be  apointed  by  the  Commis- 
sioner with  the  approval  of  the  Secretary.  The 
Board  shall  cease  to  exist  at  the  expiration  of  two 
years  after  the  passage  of  this  Act,  or  at  such  earlier 
time  as  the  Commissioner  with  the  approval  of  the 
Secretary  may  designate. 

Vacancies  in  the  membership  of  the  Board  shall 
be  filled  in  the  same  manner  as  an  original  appoint- 
ment. Any  member  shall  be  subject  to  removal  by 
the  Commissioner  with  the  approval  of  the  Secre- 
tary. The  Commissioner  with  the  approval  of  the 
Secretary  shall  designate  the  chairman  of  the 
Board.  Each  member  shall  receive  an  annual  salary 
of  $9,000,  payable  monthly,  together  with  actual 
necessary  expenses  when  absent  from  the  District 
of  Columbia  on  official  business. 

(2)  The  Commissioner  may,  and  on  the  request 
of  any  taxpayer  directly  interested  shall,  submit  to 
the  Board  any  question  relating  to  the  interpreta- 


AdmikistrativeProvisiuxs  189 

tion  or  administration  of  the  income,  war-profits  or 
excess-profits  tax  laws,  and  the  Board  shall  report 
its  findings  and  recommendations  to  the  Commis- 
sioner. 

(3)  The  Board  shall  have  its  office  in  the  Bureau  offkc 
of  Internal  Revenue  in  the  District  of  Columbia. 
The  expenses  and  salaries  of  members  of  the  Board 
shall  be  audited,  allowed,  and  paid  out  of  appro- 
priations for  collecting  internal  revenue,  in  the 
same  manner  as  expenses  and  salaries  of  employees 

of  the  Bureau  of  Internal  Revenue  are  audited,  al- 
lowed, and  paid. 

(4)  The  Board  shall  have  the  power  to  summon  Powers 
witnesses,  take  testimony,  administer  oaths,  and  to 
require  any  person  to  produce  books,  papers,  docu- 
ments, or  other  data  relating  to  any  matter  under 
investigation  by  the  Board.  Any  member  of  the 
Board  may  sign  subpoenas  and  members  and  em- 
ployees of  the  Bureau  of  Internal  Revenue  desig- 
nated to  assist  the  Board,  when  authorized  by  the 
Board,  may  administer  oaths,  examine  witnesses, 
take  testimony  and  receive  evidence. 

Sec.  1302.  That  all  internal-revenue  agents  and  Leaves  of  absence 
inspectors  shall  be  granted  leave  of  absence  with 
pay,  which  shall  not  be  cumulative,  not  to  exceed 
thirty  days  in  any  calendar  year,  under  such  regu- 
lations as  the  Commissioner,  with  the  approval  of 
the  Secretary,  may  prescribe. 

Sec.  1303.  (a)  That  there  is  hereby  created  a  Legislative  drafting 
Legislative  Drafting  Service  under  the  direction  of  »ervice 
two  draftsmen,  one  of  whom  shall  be  appointed  by 
the  President  of  the  Senate,  and  one  by  the  Speaker 
of  the  House  of  Representatives,  without  reference 
to  political  affiliations  and  solely  on  the  ground  of 
fitness  to  perform  the  duties  of  the  office.  Each 
draftsman  shall  receive  a  salary  of  $5,000  a  year, 
payable  monthly.    The  draftsmen  shall,  subject  to 


190 


Revenue    Act 


Duties  of  drafting 
service 


Appropriation  for 
drafting  service 


Imports  of  taxable 
goods  from  Virgin 
Islands 


the  approval  of  the  President  of  the  Senate  and  the 
Speaker  of  the  House  of  Representatives,  employ 
and  fix  the  compensation  of  such  assistant  drafts- 
men, clerks,  and  other  employees,  and  purchase 
such  furniture,  office  equipment,  books,  stationery, 
and  other  supplies,  as  may  be  necessary  for  the 
proper  performance  of  the  duties  of  the  service  and 
as  may  be  appropriated  for  by  Congress. 

(b)  The  Drafting  Service  shall  aid  in  drafting 
public  bills  and  resolutions  or  amendments  thereto 
on  the  request  of  any  committee  of  either  House  of 
Congress,  but  the  Library  Committee  of  the  Senate 
and  the  Library  Comimittee  of  the  House  of  Repre- 
sentatives, respectively,  may  determine  the  prefer- 
ence, if  any,  to  be  given  to  such  requests  of  the 
committees  of  either  House,  respectively.  The 
draftsmen  shall,  from  time  to  time,  prescribe  rules 
and  regulations  for  the  conduct  of  the  work  of  the 
service  for  the  committees  of  each  House,  subject 
to  the  approval  of  the  Library  Conmiittee  of  each 
House,  respectively. 

(c)  For  the  remainder  of  the  current  fiscal  year 
there  is  hereby  appropriated,  out  of  any  money  in 
the  Treasury  not  otherwise  appropriated,  the  sum 
of  $25,000,  or  so  much  thereof  as  may  be  necessary, 
for  the  purpose  of  defraying  the  expenses  of  the 
establishment  and  maintenance  of  the  service,  in- 
cluding the  payment  of  salaries  herein  authorized. 
One-half  of  all  appropriations  for  the  service  shall 
be  disbursed  by  the  Secretary  of  the  Senate  and  one- 
half  by  the  Clerk  of  the  House  of  Representatives. 

Sec.  1304.  That  there  shall  be  levied,  collected, 
and  paid  in  the  United  States,  upon  articles  coming 
into  the  United  States  from  the  Virgin  Islands,  a 
tax  equal  to  the  internal-revenue  tax  imposed  in  the 
United  States  upon  like  articles  of  domestic  manu- 
facture; such  articles  shipped  from  such  islands  to 


Administrative    Provisions  191 

the  United  States  shall  be  exempt  from  the  pay- 
ment of  any  tax  imposed  by  the  internal-revenue 
laws  of  such  islands;  Provided,  That  there  shall  be  Exports  of  taxable 
levied,  collected  and  paid  in  such  islands,  upon  ar-  8««<^*  '/o™  u.  s. 
tides  imported  from  the  United  States,  a  tax  equal  ***  "^^'"  '  *"  * 
to  the  internal-revenue  tax  imposed  in  such  islands 
upon  like  articles  there  manufactured ;  and  such  ar- 
ticles going  into  such  islands  from  the  United  States 
shall  be  exempt  from  payment  of  any  tax  imposed 
by  the  internal-revenue  laws  of  the  United  States. 

Sec.  1305.    That  all  administrative,  special,  or  Extension  of  existing 
stamp  provisions  of  law,  including  the  law  relating  ad»»"n««t''ative  pro- 

.1  j.i?j.  i?  Tl.1  visions  to  this  Ad 

to  the  assessment  oi  taxes,  so  tar  as  applicable,  are 
hereby  extended  to  and  made  a  part  of  this  Act, 
and  every  person  liable  to  any  tax  imposed  by  this 
Act,  or  for  the  collection  thereof,  shall  keep  such 
records  and  render,  under  oath,  such  statements  and 
returns,  and  shall  comply  with  such  regulations  as 
the  Commissioner,  with  the  approval  of  the  Secre- 
tary, may  from  time  to  time  prescribe. 

Whenever  in  the  judgment  of  the  Commissioner 
necessary  he  may  require  any  person,  by  notice 
served  upon  him,  to  make  a  return  or  such  state- 
ments as  he  deems  sufficient  to  show  whether  or  not 
such  person  is  liable  to  tax. 

The  Commissioner,  for  the  purpose  of  ascertain-  Commissioner  may 
ing  the  correctness  of  any  return  or  for  the  purpose  ^^a*™"*  ^^^* 
of  making  a  return  where  none  has  been  made,  is 
hereby  authorized,  by  any  revenue  agent  or  inspec- 
tor designated  by  him  for  that  purpose,  to  examine 
any  books,  papers,  records  or  memoranda  bearing 
upon  the  matters  required  to  be  included  in  the  re- 
turn, and  may  require  the  attendance  of  the  person 
rendering  the  return  or  of  any  officer  or  employee 
of  such  person,  or  the  attendance  of  any  other  per- 

,.,  ii'.i  •  T  .1        May  take  testimony 

son  havmg  knowledge  m  the  premises,  and  may  take  ^^^  administer  oaths 
his  testimony  with  reference  to  the  matter  required 


192 


Revenue    Act 


Floor  taxes,  returns 


Payment 


General  administra- 
tive power  of 
Commissioner 


Title  XI  made 
applicable 


Penalty  for  failure 
to  make  returns,  give 
information,  or  collect 
and  pay  tax 


by  law  to  be  included  in  such  return,  with  power  to 
administer  oaths  to  such  person  or  persons. 

Sec.  1306.  That  where  floor  taxes  are  imposed 
by  this  Act  in  respect  to  articles  or  commodities,  in 
respect  to  which  the  tax  imposed  by  existing  law  has 
been  paid,  the  person  required  by  this  Act  to  pay 
the  tax  shall,  within  thirty  days  after  its  passage, 
make  return  under  oath  in  such  form  and  under 
such  regulations  as  the  Commissioner,  with  the  ap- 
proval of  the  Secretary,  shall  prescribe.  Payment 
of  the  tax  shown  to  be  due  may  be  extended  to  a 
date  not  exceeding  seven  months  from  the  passage 
of  this  Act,  upon  the  fihng  of  a  bond  for  payment 
in  such  form  and  amount  and  with  such  sureties  as 
the  Commissioner,  with  the  approval  of  the  Secre- 
tary, may  prescribe. 

Sec.  1307.  That  in  all  cases  where  the  method  of 
collecting  the  tax  imposed  by  this  Act  is  not  spe- 
cifically provided  in  this  Act,  the  tax  shall  be  col- 
lected in  such  manner  as  the  Commissioner,  with 
the  approval  of  the  Secretary,  may  prescribe.  All 
administrative  and  penalty  provisions  of  Title  XI 
of  this  Act,  in  so  far  as  applicable,  shall  apply  to 
the  collection  of  any  tax  which  the  Commissioner 
determines  or  prescribes  shall  be  paid  by  stamp. 

Sec.  1308.  (a)  That  any  person  required  under 
Titles  V,  VI,  VII,  VIII,  IX,  X,  or  XII,  to  pay, 
or  to  collect,  account  for  and  pay  over  any  tax,  or 
required  by  law  or  regulations  made  under  authority 
thereof  to  make  a  return  or  supply  any  information 
for  the  purposes  of  the  computation,  assessment  or 
collection  of  any  such  tax,  who  fails  to  pay,  collect, 
or  truly  account  for  and  pay  over  any  such  tax, 
make  any  such  return  or  supply  any  such  informa- 
tion at  the  time  or  times  required  by  law  or  regula- 
tion shall  in  addition  to  other  penalties  provided  by 


Admixistrative   Provisions  193 

law  be  subject  to  a  penalty  of  not  more  than 
$1,000. 

(b)  Any  person  who  willfully  refuses  to  pay,  col-  Penalty  for  winful 
lect,  or  truly  account  for  and  pay  over  any  such  tax,  '*'""'  *"  '°**'®  "" 
make  such  return  or  supply  such  information  at  the  "™*  **'  ***^  " 
time  or  times  required  by  law  or  regulation,  or  who 

willfully  attempts  in  any  manner  to  evade  such  tax 
shall  be  guilty  of  a  misdemeanor  and  in  addition  to 
other  penalties  provided  by  law  shall  be  fined  not 
more  than  $10,000  or  imprisoned  for  not  more  than 
one  year,  or  both,  together  with  the  costs  of  prose- 
cution. 

(c)  Any  person  who  willfully  refuses  to  pay,  col-  Additional  penalty 
lect,  or  truly  account  for  and  pay  over  any  such  tax  ®'  ^®"***®  ****  "^ 
shall  in  addition  to  other  penalties  provided  by  law 

be  liable  to  a  penalty  of  the  amount  of  the  tax 
evaded,  or  not  paid,  collected,  or  accounted  for  and 
paid  over,  to  be  assessed  and  collected  in  the  same 
manner  as  taxes  are  assessed  and  collected;  Pro- 
vided, however.  That  no  penalty  shall  be  assessed 
under  this  subdivision  for  any  offense  for  which  a 
penalty  may  be  assessed  under  authority  of  section 
3176  of  the  Revised  Statutes,  as  amended,  or  of  sec- 
tion 605  or  620  of  this  Act,  or  for  any  offense  for 
which  a  penalty  has  been  recovered  under  section 
3256  of  the  Revised  Statutes. 

(d)  The  term  "person"  as  used  in  this  section  in-  Person  defined 
eludes  an  officer  or  employee  of  a  corporation  or  a 
member  or  employee  of  a  partnership,  who  as  such 

officer,  employee,  or  member  is  under  a  duty  to  per- 
form the  act  in  respect  of  which  the  violation  occurs. 

Sec.  1309.  That  the  Commissioner,  with  the  ap-  Reguiationa 
proval  of  the  Secretary,  is  hereby  authorized  to 
make  all  needful  rules  and  regulations  for  the  en- 
forcement of  the  provisions  of  this  Act. 

The  Commissioner  with  such  approval  may  by 
regulation  provide  that   any  return  required   by 


194 


Revenue   Act 


witnesses 


Overpayments  and 
overcollections 


Payment  of  tax  where 
goods  are  sold  on 
credit 


Acknowledgment  of      Titles  V,  VI,  VII,  VIII,  IX  OT  X  to  be  under  oath 
certain  returns  before   ^^y^  j£  ^.j^^  amouiit  of  the  tax  covercd  thereby  is 

not  in  excess  of  $10,  be  signed  or  acknowledged  be- 
fore two  witnesses  instead  of  under  oath. 

Sec.  1310.  (a)  That  in  the  case  of  any  overpay- 
ment or  overcoUection  of  any  tax  imposed  by  sec- 
tion 628  or  630  or  by  Title  V,  Title  VIII,  or  Title 
IX,  the  person  making  such  overpayment  or  over- 
collection  may  take  credit  therefor  against  taxes 
due  upon  any  monthly  return,  and  shall  make  re- 
fund of  any  excessive  amount  collected  by  him  upon 
proper  application  by  the  person  entitled  thereto. 

(b)  Wherever  in  this  Act  a  tax  is  required  to  be 
paid  by  the  purchaser  to  the  vendor  at  the  time  of  a 
sale,  and  such  sale  is  made  on  credit,  then,  under 
regulations  prescribed  by  the  Commissioner,  with 
the  approval  of  the  Secretary,  the  tax  may,  at  the 
option  of  the  vendor,  be  returned  and  paid  by  him 
to  the  United  States  as  if  paid  to  him  by  the  pur- 
chaser at  the  time  of  the  sale,  and  in  such  case  the 
vendor  shall  have  a  right  of  action  in  any  court  of 
competent  jurisdiction  against  the  purchaser  for 
the  amount  of  the  tax  so  returned  and  paid  to  the 
United  States. 

(c)  Under  such  rules  and  regulations  as  the 
Commissioner  with  the  approval  of  the  Secretary 
may  prescribe,  the  taxes  imposed  under  the  pro- 
visions of  Titles  VI,  VII  or  IX  shall  not  apply  in 
respect  to  articles  sold  or  leased  for  export  and  in 
due  course  so  exported.  Under  such  rules  and 
regulations  the  amount  of  any  internal-revenue  tax 
erroneously  or  illegally  collected  in  respect  to  ex- 
ported airticles  may  be  refunded  to  the  exporter  of 
the  article,  instead  of  to  the  manufacturer,  if  the 
manufacturer  waives  any  claim  for  the  amount  so  to 
be  refunded. 


Taxes  on  beverages 
and  tobacco  and 
excise  taxes  not  to 
apply  to  goods 
exported 


AdmikistkativeProvi8ion8  195 

Sec.  1311.  That  where  the  rate  of  tax  imposed  Use  of  stamps  already 
by  this  Act,  payable  by  stamps,  is  an  increase  over  *"  ^^^^ 
previously  existing  rates,  stamps  on  hand  in  the  col- 
lectors' offices  and  in  the  Bureau  of  Internal  Reve- 
nue may  continue  to  be  used  until  the  supply  on 
hand  is  exhausted,  but  shall  be  sold  and  accounted 
for  at  the  rates  provided  by  this  Act,  and  assess- 
ment shall  be  made  against  manufacturers  and  oth^ 
taxpayers  having  such  stamps  on  hand  on  the  day 
this  Act  takes  effect  for  the  difference  between  the 
amount  paid  for  such  stamps  and  the  tax  due  at  the 
rates  provided  by  this  Act. 

Sec.  1312.  (1)    That  (a)  if  any  person  has  prior  Comracis  preventing 
to  May  9,  1917,  made  a  bona  fide  contract  with  a  ^^f  {J^^V  ri"  m^^^ 
dealer  for  the  sale  or  lease,  after  the  tax  takes  ef-  ^^^^  tTiviay"  "917 
feet,  of  any  article  in  respect  to  which  a  tax  is  im- 
posed under  Title  VI,  VII,  or  IX,  or  under  sub- 
division 13  of  Schedule  A  of  Title  XI,  or  under 
this  subdivision,  and  (b)  if  such  contract  does  not 
permit  the  adding  of  the  whole  of  such  tax  to  the 
amount  to  be  paid  under  such  contract,  then  the 
vendee  or  lessee  shall,  in  lieu  of  the  vendor  or  lessor, 
pay  so  much  of  such  tax  as  is  not  so  permitted  to 
be  added  to  the  contract  price.    If  a  contract  of  the 
character  above  described  was  made  with  any  per- 
son other  than  a  dealer,  the  tax  collected  under  this 
Act  shall  be  the  tax  in  force  on  May  9,  1917. 

(2)  If  (a)  any  person  has  prior  to  September  Contracts  prior  to 
3,  1918,  made  a  bona  fide  contract  with  a  dealer  for  ^epteniber  3  1918 

with  regard  to  goods 

the  sale  or  lease,  after  the  tax  takes  effect,  of  any  not  then  taxable 
article  in  respect  to  which  a  tax  is  imposed  under 
Title  VI,  VII,  or  IX,  or  under  subdivision  13  of 
Schedule  A  of  Title  XI,  or  under  this  subdivision, 
and  in  respect  to  which  no  corresponding  tax  was 
imposed  by  the  Revenue  Act  of  1917,  and  (b)  such 
contract  does  not  permit  the  adding,  to  the  amount 
to  be  paid  under  such  contract,  of  the  whole  of  the 


196 


Re VE  N  UE     A  CT 


Contracts  prior  to 
Sept.  3, 1918,  with 
regard  to  goods  then 
taxable. 


Payment  and  collec- 
tion of  taxes  in  such 


cases 


See  page  103 


Dealer  defined 


tax  imposed  by  this  Act,  then  the  vendee  or  lessee 
shall,  in  lieu  of  the  vendor  or  lessor,  pay  so  much  of 
the  tax  imposed  by  this  Act  as  is  not  so  permitted  to 
be  added  to  the  contract  price.  If  a  contract  of  the 
character  above  described  was  made  with  any  per- 
son other  than  a  dealer,  no  tax  shall  be  collected 
under  this  Act. 

(3)  If  (a)  any  person  has  prior  to  September  3, 
1918,  made  a  bona  fide  contract  with  a  dealer  for 
the  sale  or  lease,  after  the  tax  takes  effect,  of  any 
article  in  respect  to  which  a  tax  is  imposed  under 
Title  VI,  VII,  or  IX,  or  under  subdivision  13  of 
Schedule  A  of  Title  XI,  or  under  this  subdivision, 
and  in  respect  to  which  a  corresponding  tax  was 
imposed  by  the  Revenue  Act  of  1917,  and  (b)  such 
contract  does  not  permit  the  adding,  to  the  amount 
to  be  paid  under  such  contract,  of  the  whole  of  the 
difference  between  such  tax  and  the  corresponding- 
tax  imposed  by  the  Revenue  Act  of  1917",  then  the 
vendee  or  lessee  shall,  in  lieu  of  the  vendor  or  lessor, 
pay  so  much  of  such  difference  as  is  not  so  permitted 
to  be  added  to  the  contract  price.  If  a  contract  of 
the  character  above  described  was  made  with  any 
person  other  than  a  dealer,  the  tax  collected  under 
this  Act  shall  be  the  tax  in  force  on  September  3, 
1918. 

(4)  The  taxes  payable  by  the  vendee  or  lessee 
under  this  section  shall  be  paid  to  the  vendor  or 
lessor  at  the  time  the  sale  or  lease  is  consummated, 
and  collected,  returned,  and  paid  to  the  United 
States  by  such  vendor  or  lessor  in  the  same  manner 
as  provided  in  section  502. 

(5)  The  term  "dealer"  as  used  in  this  section  in- 
cludes a  vendee  who  purchases  any  article  with  in- 
tent to  use  it  in  the  manufacture  or  production  of 
another  article  intended  for  sale. 


Admixistbative    Provisions  197 

(6)  This  section  shall  not  apply  to  any  tax  im- 
posed by  section  906. 

Sec.  1313.   That  in  the  payment  of  any  tax  un-  Fractional  part$  of 
der  this  Act  not  payable  by  stamp  a  fractional  part  ""t 
of  a  cent  shall  be  disregarded  unless  it  amounts  to 
one-half  cent  or  more,  in  which  case  it  shall  be  in- 
creased to  1  cent. 

Sec.  1314.   That  collectors  may  receive,  at  par  u«e  of  u.  s.  ceni- 
with  an  adjustment  for  accrued  interest,  certifi-  ficates  of  indebtedness 
cates  of  indebtedness  issued  by  the  United  States  f "^  """^^'^  '^''^' 

.  •'  in  payments 

and  uncertified  checks  m  payment  of  income,  war- 
profits  and  excess-profits  taxes  and  any  other  taxes 
payable  other  than  by  stamp,  during  such  time  and 
under  such  regulations  as  the  Commissioner,  with 
the  approval  of  the  Secretary,  shall  prescribe;  but 
if  a  check  so  received  is  not  paid  by  the  bank  on 
which  it  is  drawn  the  person  by  whom  such  check 
has  been  tendered  shall  remain  liable  for  the  pay- 
ment of  the  tax  and  for  all  legal  penalties  and  ad- 
ditions the  same  as  if  such  check  had  not  been 
tendered. 

Sec.  1315.    That  section  3315  of  the  Revised  Sec.  3315  u.  s.  R.  s. 
Statutes,  as  amended,  is  hereby  amended  to  read  amended 
as  follows: 

**Sec.  3315.  The  Commissioner  of  Internal  Reve-  Restamping  of  pack- 
nue  may,  under  regulations  prescribed  by  him  with  >««« 
the  approval  of  the  Secretary  of  the  Treasury,  issue 
stamps  for  restamping  packages  of  distilled  spirits, 
tobacco,  cigars,  snuff,  cigarettes,  fermented  liquors, 
and  wines  which  have  been  duly  stamped  but  from 
which  the  stamps  have  been  lost  or  destroyed  by  un- 
avoidable accident." 

Sec.  1316.  (a)    That  section  3220  of  the  Revised  Sec.  3320  u. s.  R.  s. 
Statutes  is  hereby  amended  to  read  as  follows :  amended 

"Sec.  3220.  The  Commissioner  of  Internal  Reve-  Refunds  of  taxes 
nue,  subject  to  regulations  prescribed  by  the  Secre- 
tary of  the  Treasury,  is  authorized  to  remit,  refund. 


198  REVENUEAct 

and  pay  back  all  taxes  erroneously  or  illegally  as- 
sessed or  collected,  all  penalties  collected  without 
authority,  and  all  taxes  that  appear  to  be  unjustly 
assessed  or  excessive  in  amount,  or  in  any  manner 
wrongfully  collected ;  also  to  repay  to  any  collector 
or  deputy  collector  the  full  amount  of  such  sums  of 
money  as  may  be  recovered  against  him  in  any 
court,  for  any  internal  revenue  taxes  collected  by 
him,  with  the  cost  and  expenses  of  suit ;  also  all  dam- 
ages and  costs  recovered  against  any  assessor,  as- 
sistant assessor,  collector,  deputy  collector,  agent 
or  inspector,  in  any  suit  brought  against  him  by 
reason  of  anything  done  in  the  due  performance 
of  his  official  duty,  and  shall  make  report  to  Con- 
gress at  the  beginning  of  each  regular  session  of 
Congress  of  all  transactions  under  this  section." 
Sec.  3225  u.  s.  R.  s.  (b)  Scctiou  3225  of  the  Revised  Statutes  of  the 
amended  United  Statcs  is  hereby  amended  to  read  as  follows : 

Second  assessments         "Sec.  3225.  Whcu  a  sccoud  asscssmcut  is  made 

in  case  of  any  list,  statement,  or  return,  which  in 
the  opinion  of  the  collector  or  deputy  collector  was 
false  or  fraudulent,  or  contained  any  understate- 
ment or  undervaluation,  such  assessment  shall  not 
be  remitted,  nor  shall  taxes  collected  under  such 
assessment  be  refunded,  or  paid  back,  or  recovered 
by  any  suit,  unless  it  is  proved  that  such  list,  state- 
ment, or  return  was  not  willfully  false  or  fraudu- 
lent and  did  not  contain  any  willful  understate- 
ment or  undervaluation." 
Sec.  3689  u.  s.  R.  s.  (c)  That  the  paragraph  of  section  3689  of  the 
repealed  in  part         Reviscd  Statutes  as  amended,  reading  as  follows: 

"Refunding  taxes  illegally  collected  (internal 
revenue) :  To  refund  and  pay  back  duties  errone- 
ously or  illegally  assessed  or  collected  under  the 
internal-revenue  laws,"  is  repealed  from  and  after 
June  30,  1920;  and  the  Secretary  of  the  Treasury 
shall  submit  for  the  fiscal  year  1921,  and  annually 


Administrative    Peovisions  199 

thereafter,  an  estimate  of  appropriations  to  refund 
and  pay  back  duties  or  taxes  erroneously  or  illegally  ^"J""**  esumaie  of 
assessed  or  collected  under  the  internal-revenue 
laws,  and  to  pay  judgments,  including  interest  and 
costs,  rendered  for  taxes  or  penalties  erroneously 
or  illegally  assessed  or  collected  under  the  internal- 
revenue  laws. 

Sec.  1317.  That  sections  3164,  3165,  3167,  3172, 
3173,  and  3176  of  the  Revised  Statutes  as  amended  u.s.R.s.  amended 
are  hereby  amended  to  read  as  follows : 

"Sec.  3164.     It  shall  be  the  duty  of  every  col-  -  . ,        »  •  i .. 

.•''^  Lvidence  of  violations 

lector  of  mternal  revenue  havmg  knowledge  of  any  to  be  filed  with  district 

willful  violation  of  any  law  of  the  United  States  attorney 

relating  to  the  revenue,  within  thirty  days  after 

coming  into  possession  of  such  knowledge,  to  file 

with  the  district  attorney  of  the  district  in  which 

any  fine,  penalty,  or  forfeiture  may  be  incurred, 

a  statement  of  all  the  facts  and  circimistances  of  the 

case  within  his  knowledge,  together  with  the  names 

of  the  witnesses,  setting  forth  the  provisions  of  law 

believed  to  be  so  violated  on  which  reliance  may  be 

had  for  condemnation  or  conviction. 

*'Sec.  3165.    Every  collector,  deputy  collector,  Administration  of 
internal-revenue  agent,  and  internal-revenue  oflB-  oaths  and  securing 
cer  assigned  to  duty  under  an  internal-revenue  of  evidence 
agent,  is  authorized  to  administer  oaths  and  to  take 
evidence  touching  any  part  of  the  administration 
of   the   internal-revenue   laws   with   which   he    is 
charged,  or  where  such  oaths  and  evidence  are  au- 
thorized by  law  or  regulation  authorized  by  law  to 
be  taken. 

"Sec.  3167.   It  shall  be  unlawful  for  any  collec-  information  not  to 
tor,  deputy  collector,  agent,  clerk,  or  other  officer  be  revealed 
or  employee  of  the  United  States  to  divulge  or  to 
make  known  in  any  manner  whatever  not  provided 
by  law  to  any  person  the  operations,  style  of  work, 
or  apparatus  of  any  manufacturer  or  producer 


2W)  Retenue   Act 

visited  by  him  in  the  discharge  of  his  official  duties, 
or  the  amount  or  source  of  income,  profits,  losses, 
expenditures,  or  any  particular  thereof,  set  forth 
or  disclosed  in  any  income  return,  or  to  permit  any 
income  return  or  copy  thereof  or  any  book  con- 
taining any  abstract  or  particulars  thereof  to  be 
seen  or  examined  by  any  person  except  as  pro- 
vided by  law;  and  it  shall  be  unlawful  for  any  per- 
son to  print  or  pubhsh  in  any  manner  whatever  not 
provided  by  law  any  income  return,  or  any  part 
thereof  or  source  of  income,  profits,  losses,  or  ex- 
penditures appearing  in  any  income  return;  and 
any  offense  against  the  foregoing  provision  shall 
be  a  misdemeanor  and  be  punished  by  a  fine  not 
exceeding  $1,000  or  by  imprisonment  not  exceed- 
ing one  year,  or  both,  at  the  discretion  of  the  court; 
and  if  the  offender  be  an  officer  or  employee  of  the 
United  States  he  shall  be  dismissed  from  office  or 
discharged  from  employment. 
invettigatioM  "Sec.  3172.   Evcry  collector  shall,  from  time  to 

time,  cause  his  deputies  to  proceed  through  every 
part  of  his  district  and  inquire  after  and  concern- 
ing all  persons  therein  who  are  liable  to  pay  any 
internal-revenue  tax,  and  all  persons  owning  or 
having  the  care  and  management  of  any  objects 
liable  to  pay  any  tax,  and  to  make  a  list  of  such 
persons  and  enumerate  said  objects. 
Returns,  when  re-  "Sec.  3173.   It  shall  bc  the  duty  of  any  person, 

*»™'®**  partnership,  firm,  association,  or  corporation,  made 

liable  to  any  duty,  special  tax,  or  other  tax  imposed 
by  law,  when  not  otherwise  provided  for,  (1)  in 
case  of  a  special  tax,  on  or  before  the  thirty-first 
day  of  July  in  each  year,  and  (2)  in  other  cases 
before  the  day  on  which  the  taxes  accrue,  to  make  a 
list  or  return,  verified  by  oath,  to  the  collector  or  a 
deputy  collector  of  the  district  where  located,  of 
the  articles  or  objects,  including  the  quantity  of 


Admikibtrative    Provisioks  201 

goods,  wares,  and  merchandise,  made  or  sold  and 
charged  with  a  tax,  the  several  rates  and  aggre- 
gate amount,  according  to  the  forms  and  regula- 
tions to  be  prescribed  by  the  Commissioner  of  In- 
ternal Revenue,  with  the  approval  of  the  Secretary 
of  the  Treasury,  for  which  such  person,  partner- 
ship, firm,  association,  or  corporation  is  liable ;  Pro- 
vided, That  if  any  person  liable  to  pay  any  duty 
or  tax,  or  owning,  possessing,  or  having  the  care 
or  management  of  property,  goods,  wares,  and  mer- 
chandise, article  or  objects  Uable  to  pay  any  duty.  When  collector  shall 
tax,  or  license,  shall  fail  to  make  and  exhibit  a  list  "^^^  ^^*""  ^*"' 

.  ,        taxpayer 

or  return  required  by  law,  but  shall  consent  to  dis- 
close the  particulars  of  any  and  all  the  property, 
goods,  wares,  and  merchandise,  articles,  and  objects 
Uable  to  pay  any  duty  or  tax,  or  any  business  or 
occupation  liable  to  pay  any  tax  as  aforesaid,  then, 
and  in  that  case,  it  shall  be  the  duty  of  the  collector 
or  deputy  collector  to  make  such  list  or  return, 
which,  being  distinctly  read,  consented  to,  and 
signed  and  verified  by  oath  by  the  person  so  own- 
ing, possessing,  or  having  the  care  and  management 
as  aforesaid,  may  be  received  as  the  list  of  such  per- 
son ;  Provided  further.  That  in  case  no  annual  list  ^***'*^*  ®'  require- 
or  return  has  been  rendered  by  such  person  to  the 
collector  or  deputy  collector  as  required  by  law,  and 
the  person  shall  be  absent  from  his  or  her  residence 
or  place  of  business  at  the  time  the  collector  or  a 
deputy  collector  shall  call  for  the  annual  list  or  re- 
turn, it  shall  be  the  duty  of  such  collector  or  deputy 
collector  to  leave  at  such  place  of  residence  or  busi- 
ness, with  some  one  of  suitable  age  and  discretion, 
if  such  be  present,  otherwise  to  deposit  in  the  near- 
est post  office,  a  note  or  memorandum  addressed 
to  such  person,  requiring  him  or  her  to  render  to 
such  collector  or  deputy  collector  the  list  or  return 
required  by  law  within  ten  days  from  the  date  of 


202  RevenueAct 

such  note  or  memorandum,  verified  by  oath.  And 
if  any  person,  on  being  notified  or  required  as  afore- 
said, shall  refuse  or  neglect  to  render  such  list  or 
return  within  the  time  required  as  aforesaid,  or 
whenever  any  person  who  is  required  to  deliver  a 
monthly  or  other  return  of  objects  subject  to  tax 
fails  to  do  so  at  the  time  required,  or  delivers  any 
return  which,  in  the  opinion  of  the  collector,  is 
erroneous,  false,  or  fraudulent,  or  contains  any  un- 
dervaluation or  understatement,  or  refuses  to  allow 
any  regularly  authorized  Government  officer  to  ex- 
.  amine  the  books  of  such  person,  firm,  or  corpora- 
taxable  persons  tioi^j  it  shall  be  lawful  for  the  collector  to  smnmon 

such  person,  or  any  other  person  having  possession, 
custody,  or  care  of  books  of  account  containing  en- 
tries relating  to  the  business  of  such  person  or  any 
other  person  he  may  deem  proper,  to  appear  before 
him  and  produce  such  books  at  a  time  and  place 
named  in  the  summons,  and  to  give  testimony  or 
answer  interrogatories,  under  oath,  respecting  any 
objects  or  income  liable  to  tax  or  the  returns 
thereof.  The  collector  may  summon  any  person 
residing  or  found  within  the  State  or  Territory  in 
which  his  district  lies ;  and  when  the  person  intended 
to  be  summoned  does  not  reside  and  can  not  be 
found  within  such  State  or  Territory,  he  may  en- 
ter any  collection  district  where  such  person  may 
be  found  and  there  make  the  examination  herein 
authorized.  And  to  this  end  he  may  there  exercise 
'  all  the  authority  which  he  might  lawfully  exercise 
in  the  district  for  which  he  was  commissioned;  Pro- 
vided, That  'person,'  as  used  in  this  section,  shall 
be  construed  to  include  any  corporation,  joint- 
stock  company  or  association,  or  insurance  company 
when  such  construction  is  necessary  to  carry  out  its 
provisions. 


Administrative   Provisioxs  203 

"Sec.  3176.  If  any  person,  corporation,  com-  when  collector  shall 
pany,  or  association  fails  to  make  and  file  a  return  "*''^  return  from 
or  list  at  the  time  prescribed  by  law  or  by  regula- 
tion made  under  authority  of  law,  or  makes,  will- 
fully or  otherwise,  a  false  or  fraudulent  return  or 
list,  the  collector  or  deputy  collector  shall  make  the 
return  or  list  from  his  own  knowledge  and  from 
such  information  as  he  can  obtain  through  testi- 
mony or  otherwise.  In  any  such  case  the  Commis- 
sioner may,  from  his  own  knowledge  and  from 
such  information  as  he  can  obtain  through  testi- 
mony or  otherwise,  make  a  return  or  amend  any  re- 
turn made  by  a  collector  or  deputy  collector.  Any 
return  or  list  so  made  and  subscribed  by  the  Com- 
sioner,  or  by  a  collector  or  deputy  collector  and  ap- 
proved by  the  Commissioner,  shall  be  prima  facie 
good  and  sufficient  for  all  legal  purposes. 

"If  the  failure  to  file  a  return  or  list  is  due  to  Extension  of  time  for 
sickness  or  absence,  the  collector  may  allow  such  fi**"?"*®*"^" 
further  time,  not  exceeding  thirty  days,  for  making 
and  filing  the  return  or  list  as  he  deems  proper. 

"The  Commissioner  of  Internal  Revenue  shall  Commissioner  to 
determine  and  assess  all  taxes,  other  than  stamp  "**" 
taxes,  as  to  which  returns  or  lists  are  so  made  un- 
der the  provisions  of  this  section.    In  case  of  any 
failure  to  make  and  file  a  return  or  list  within  the 
time  prescribed  by  law,  or  prescribed  by  the  Com-  Penalty  for  failure 
missioner  of  Internal  Revenue  or  the  collector  in  »« fi»« "»»""«"  «»"• 
pursuance  of  law,  the  Commissioner  of  Internal 
Revenue  shall  add  to  the  tax  25  per  centum  of  its 
amount,  except  that  when  a  return  is  filed  after  such 
time  and  it  is  shown  that  the  failure  to  file  it  was 
due  to  a  reasonable  cause  and  not  to  willful  neglect, 
no  such  addition  shall  be  made  to  the  tax.  In  case 
a  false  or  fraudulent  return  or  hst  is  willfully  made,  p^^^^^  ^^  ^^^^^^^ 
the  Commissioner  of  Internal  Revenue  shall  add  lent  returns 
to  the  tax  50  per  centum  of  its  amount. 


204, 


Revenue    Act 


Court  of  jurisdiction 


Collection  of  penalties  "The  amount  SO  added  to  any  tax  shall  be  col- 
lected at  the  same  time  and  in  the  same  manner  and 
as  part  of  the  tax  unless  the  tax  has  been  paid  be- 
fore the  discovery  of  the  neglect,  falsity,  or  fraud, 
in  which  case  the  amount  so  added  shall  be  collected 
in  the  same  manner  as  the  tax." 

Sec.  1318.  That  if  any  person  is  summoned  un- 
der this  Act  to  appear,  to  testify,  or  to  produce 
books,  papers  or  other  data,  the  district  court  of  the 
United  States  for  the  district  in  which  such  person 
resides  shall  have  jurisdiction  by  appropriate  pro- 
cess to  compel  such  attendance,  testimony,  or  pro- 
duction of  books,  papers,  or  other  data. 

The  district  courts  of  the  United  States  at  the  in- 
stance of  the  United  States  are  hereby  invested 
with  such  jurisdiction  to  make  and  issue,  both  in 
actions  at  law  and  suits  in  equity,  writs  and  orders 
of  injunction,  and  of  ne  exeat  republica,  orders  ap- 
pointing receivers,  and  such  other  orders  and  pro- 
cess, and  to  render  such  judgments  and  decrees, 
granting  in  proper  cases  both  legal  and  equitable 
relief  together,  as  may  be  necessary  or  appropriate 
for  the  enforcement  of  the  provisions  of  this  Act. 
The  remedies  hereby  provided  are  in  addition  to 
and  not  exclusive  of  any  and  all  other  remedies  of 
the  United  States  in  such  courts  or  otherwise  to 
enforce  such  provisions. 

Sec.  1319.  That  whoever  in  connection  with  the 
amount  of  tax  included  sale  or  Icasc,  or  off  cr  f  Or  salc  or  lease,  of  any  arti- 
in  price  of  goods         ^|^^  ^^  ^^^  ^j^^  purposc  of  making  such  sale  or  lease, 

makes  any  statement,  written  or  oral,  ( 1 )  intended 
or  calculated  to  lead  any  person  to  believe  that  any 
part  of  the  price  at  which  such  article  is  sold  or 
leased,  or  offered  for  sale  or  lease,  consists  of  a  tax 
imposed  under  the  authority  of  the  United  States, 
or  (2)  ascribing  a  particular  part  of  such  price  to 
a  tax  imposed  under  the  authority  of  the  United 


Misrepresentation  of 


AOMIKISTRATIVE     PROVI8Tt)N8  205 

States,  knowing  that  such  statement  is  false  or  that 
the  tax  is  not  so  great  as  the  portion  of  such  price 
ascribed  to  such  tax,  shall  be  guilty  of  a  misde- 
meanor and  upon  conviction  thereof  shall  be  pun-  Penalty 
ished  by  a  fine  of  not  more  than  $1,000  or  by  im- 
prisonment not  exceeding  one  year,  or  both. 

Sec.  1320.    That  wherever  by  the  laws  of  the  Penal  bond: 
United    States    or    regulations    made    pursuant 
thereto,  any  person  is  required  to  furnish  any  re- 
cognizance, stipulation,  bond,  guaranty,  or  under- 
taking, hereinafter  called  "penal  bond,"  with  surety 
or  sureties,  such  person  may,  in  lieu  of  such  surety 
or  sureties,  deposit  as  security  with  the  official  hav- 
ing authority  to  approve  such  penal  bond.  United  Deposits  of  u.  s 
States  Liberty  bonds  or  other  bonds  of  the  United  bonds  in  lieu  of 
States  in  a  sum  equal  at  their  par  value  to  the 
amount  of  such  penal  bond  required  to  be  fur- 
nished, together  with  an  agreement  authorizing  such 
official  to  collect  or  sell  such  bonds  so  deposited  in 
case  of  any  default  in  the  performance  of  any  of 
the  conditions  or  stipulations  of  such  penal  bond. 
The  acceptance  of  such  United  States  bonds  in  lieu 
of  surety  or  sureties  required  by  law  shall  have  the 
same  force  and  effect  as  individual  or  corporate 
sureties,  or  certified  checks,  bank  drafts,  post-office 
money  orders,  or  cash,  for  the  penalty  or  amount 
of  such  penal  bond.     The  bonds  deposited  here-  with  whom  u.  s. 
under,  and  such  other  United  States  bonds  as  niay  bonds  may  be 
be  substituted  therefor  from  time  to  time  as  such    *^"*'' 
security,  may  be  deposited  with  the  Treasurer,  or 
an  Assistant  Treasurer  of  the  United  States,  a 
Government  depository.  Federal  Reserve  bank,  or 
member  bank,  which  shall  issue  receipt  therefor,  de- 
scribing such  bonds  so  deposited.     As  soon  as  se- 
curity for  the  performance  of  such  penal  bond  is 
no  longer  necessary,  such  bonds  so  deposited,  shall  R^ju^n  of  deposit 
be  returned  to  the  depositor;  Provided,  That  in 


206 


Re  VE  X  UE    Act 


Inconsistent  statutes 
modified 


Regulations 


case  a  person  or  persons  supplying  a  contractor 
with  labor  or  material  as  provided  by  the  Act  of 
Congress,  approved  February  24,  1905  (33  Stat., 
811),  entitled  "An  Act  to  amend  an  Act  approved 
August  thirteenth,  eighteen  hundred  and  ninety- 
four,  entitled  *An  Act  for  the  protection  of  persons 
furnishing  materials  and  labor  for  the  construction 
of  public  works,'  "  shall  file  with  the  obligee,  at  any 
time  after  a  default  in  the  performance  of  any  con- 
tract subject  to  said  Acts,  the  apphcation  and  affi- 
davit therein  provided,  the  obligee  shall  not  deliver 
to  the  obhgor  the  deposited  bonds  nor  any  surplus 
proceeds  thereof  until  the  expiration  of  the  time 
limited  by  said  Acts  for  the  institution  of  suit  by 
such  person  or  persons,  and,  in  case  suit  shall  be  in- 
stituted within  such  time,  shall  hold  said  bonds  or 
proceeds  subject  to  the  order  of  the  court  having 
jurisdiction  thereof;  Provided  further.  That  noth- 
ing herein  contained  shall  affect  or  impair  the 
priority  of  the  claim  of  the  United  States  against 
the  bonds  deposited  or  any  right  or  remedy  granted 
by  said  Acts  or  by  this  section  to  the  United  States 
for  default  upon  any  obhgation  of  said  penal  bond ; 
Provided  further.  That  all  laws  inconsistent  with 
this  section  are  hereby  so  modified  as  to  conform  to 
the  provisions  hereof;  And  provided  further.  That 
nothing  contained  herein  shall  affect  the  authority 
of  courts  over  the  security,  where  such  bonds  are 
taken  as  security  in  judicial  proceedings,  or  the  au- 
thority of  any  administrative  officer  of  the  United 
States  to  receive  United  States  bonds  for  security 
in  cases  authorized  by  existing  laws.  The  Secretary 
may  prescribe  rules  and  regulations  necessary  and 
proper  for  carrying  this  section  into  effect. 


TITLE  XIV. 

General  Provisions 

Sec.  1400.  (a)  That  the  following  parts  of  Acts  Repealed  provision*: 
are  hereby  repealed,  subject  to  the  limitations  pro- 
vided in  subdivision  (b) : 

(1)  The  following  titles  of  the  Revenue  Act  of  of  Revenue  Act 
1916:  ®fi9i6 

Title  I  (called  "Income  Tax") ; 
Title  II  (caUed  "Estate  Tax") ; 
Title   III    (called   "Munitions   Manufacturers' 
Tax" ) ,  as  amended ; 

Title  IV  (caUed  "Miscellaneous  Taxes"). 

(2)  The  following  parts  of  the  Act  entitled  "An  Of  Revenue  Act 
Act  to  provide  increased  revenue  to  defray  the  ex-  ®'  ^"^^  ^*  ^^^^ 
penses   of   the   increased   appropriations    for   the 

Army  and  Navy  and  the  extensions  of  fortifications, 
and  for  other  purposes,"  approved  March  3,  1917: 

Title  III  (called  "Estate  Tax") ; 

Section  402  (called  "Returns  of  Dividends"). 

(3)  The  following  titles  of  the  Revenue  Act  of  of  Revenue  Act 
1917:  ^'^^^^ 

Title  I  (called  "War  Income  Tax") ; 

Title  II  (called  "War  Excess-Profits  Tax") ; 

Title  III  (called  "War  Tax  on  Beverages) ; 

Title  IV  (called  "War  Tax  on  Cigars,  Tobacco, 
and  Manufactures  Thereof") ; 

Title  V  (called  "War  Tax  on  Facilities  Fur- 
nished by  Public  Utilities,  and  Insurance") ; 

Title  VI  (called  "War  Excise  Taxes") ; 

Title  VII  (called  "War  Tax  on  Admissions  and 
Dues") ; 

Title  VIII  (called  "War  Stamp  Taxes") ; 

207 


208 


Re  VEN  UE     A  CT 


Provisions  above 
repealed  remain 
effective  for  taxes 
accrued  under  them 


Exceptions: 

(1)  Income  and  war 
excess-profits  tax 


(2)  Estate  taxes 


Taxes  retained  until 
corresponding  tax 
takes  effect 


1916  income  tax  as 
amended  effective 
in  Porto  Rico  and 
Philippines 


Title  IX  (caUed  "War  Estate  Tax") ; 

Title  X  (called  "Administrative  Provisions") ; 

Title  XII  (called  "Income-Tax  Amendments") . 

(b)  Such  parts  of  Acts  shall  remain  in  force  for 
the  assessment  and  collection  of  all  taxes  which 
have  accrued  thereunder,  and  for  the  imposition  and 
collection  of  all  penalties  or  forfeitures  which  have 
accrued  and  may  accrue  in  relation  to  any  such 
taxes,  and  except  that  the  unexpended  balance  of 
any  appropriation  heretofore  made  and  now  avail- 
able for  the  administration  of  any  such  part  of  an 
Act  shall  be  available  for  the  administration  of  this 
Act  or  the  corresponding  provision  thereof;  Pro- 
vided, That,  except  as  otherwise  provided  in  this 
Act,  no  taxes  shall  be  collected  under  Title  I  of  the 
Revenue  Act  of  1916  as  amended  by  the  Revenue 
Act  of  1917,  or  Title  I  or  II  of  the  Revenue  Act 
of  1917,  in  respect  to  any  period  after  December 
31,  1917;  Provided  further.  That  the  assessment 
and  collection  of  all  estate  taxes,  and  the  imposition 
and  collection  of  all  penalties  or  forfeitures,  which 
have  accrued  under  Title  II  of  the  Revenue  Act  of 
1916  as  amended  by  the  Act  entitled  "An  Act  to 
provide  increased  revenue  to  defray  the  expenses  of 
the  increased  appropriations  for  the  Army  and 
Navy  and  the  extensions  of  fortifications,  and  for 
other  purposes,"  approved  March  3,  1917,  or  Title 
IX  of  the  Revenue  Act  of  1917,  shall  be  according 
to  the  provisions  of  Title  IV  of  this  Act.  In  the  case 
of  any  tax  imposed  by  any  part  of  an  Act  herein  re- 
pealed, if  there  is  a  tax  imposed  by  this  Act  in  lieu 
thereof,  the  provision  imposing  such  tax  shall  re- 
main in  force  until  the  corresponding  tax  under  this 
Act  takes  effect  under  the  provisions  of  this  Act. 

Title  I  of  the  Revenue  Act  of  1916  as  amended 
by  the  Revenue  Act  of  1917  shall  remain  in  force 
for  the  assessment  and  collection  of  the  income  tax 


General    Provisions  209 

in  Porto  Rico  and  the  Philippine  Islands,  except  as 
may  be  otherwise  provided  by  their  respective  legis- 
latures. 

Sec.  1401.  That  section  1100  of  the  Revenue  Act  Rate  on  first 
of  1917  is  hereby  repealed,  to  take  effect  on  July  '*"'  ""* 
1,  1919,  and  thereafter  the  rate  of  postage  on  all 
mail  matter  of  the  first  class  shall  be  the  same  as 
the  rate  in  force  on  October  2,  1917;  Provided, 
That  letters  wiitten  and  mailed  by  soldiers,  sailors, 
and  marines  assigned  to  duty  in  a  foreign  country 
engaged  in  the  present  war  may  be  mailed  free  of 
postage,  subject  to  such  rules  and  regulations  as 
may  be  prescribed  by  the  Postmaster  General. 

Section  1107  of  such  Act  is  hereby  repealed,  to 
take  effect  July  11,  1919. 

Sec.  1402.  That  if  any  clause,  sentence,  para-  invaKdity  of  any 
graph  or  part  of  this  Act  shall  for  any  reason  be  section 
adjudged  by  any  court  of  competent  jurisdiction  to 
be  invalid,  such  judgment  shall  not  affect,  impair, 
or  invahdate  the  remainder  of  this  Act,  but  shall  be 
confined  in  its  operation  to  the  clause,  sentence, 
paragraph,  or  part  thereof  directly  involved  in  the 
controversy  in  which  such  judgment  has  been  rend- 
ered. 

Sec.  1403.    That  the  Revenue  Act  of  1916  is  Citation  of  Revenue 
hereby  amended  by  adding  at  the  end  thereof  a  sec- 
tion to  read  as  follows: 

"Sec.  903.    That  this  Act  may  be  cited  as  the 
'Revenue  Act  of  1916.'  " 

Sec.  1404.    That  the  Revenue  Act  of  1917  is  Citation  of  Revenue 
hereby  amended  by  adding  at  the  end  thereof  a  A<^*®'^^^7 
section  to  read  as  follows: 

"Sec.  1303.   That  this  Act  may  be  cited  as  the 
'Revenue  Act  of  1917.'  " 

Sec.  1405.    That  this  Act  may  be  cited  as  the  Citation  of  Revenue 
"Revenue  Act  of  1918."  ^''  ^^  ^^^^ 


210 


Revenue   Act 


Bonus  to  persons 
discharged  from  mili- 
tary or  naval  service 


Exceptions 


When  payable 


Sec.  1406.  That  all  persons  serving  in  the  mili- 
tary or  naval  forces  of  the  United  States  during  the 
present  war  who  have,  since  April  6,  1917,  resigned 
or  been  discharged  under  honorable  conditions  (or, 
in  the  case  of  reservists,  been  placed  on  inactive 
duty),  or  who  at  any  time  hereafter  (but  not  later 
than  the  termination  of  the  current  enlistment  or 
term  of  service)  in  the  case  of  the  enlisted  person- 
nel and  female  nurses,  or  within  one  year  after  the 
termination  of  the  present  war  in  the  case  of  offi- 
cers, may  resign  or  be  discharged  under  honorable 
conditions  (or,  in  the  case  of  reservists,  be  placed  on 
inactive  duty)",  shall  be  paid,  in  addition  to  all  other 
amounts  due  them  in  pursuance  of  law,  $60  each. 

This  amount  shall  not  be  paid  ( 1 )  to  any  person 
who  though  appointed  or  inducted  into  the  military 
or  naval  forces  on  or  prior  to  November  11,  1918, 
had  not  reported  for  duty  at  his  station  on  or  prior 
to  such  date;  or  (2)  to  any  person  who  has  already 
received  one  month's  pay  under  the  provisions  of 
section  9  of  the  Act  entitled  "An  Act  to  authorize 
the  President  to  increase  temporarily  the  military 
establishment  of  the  United  States,"  approved  May 
18,  1917;  or  (3)  to  any  person  who  is  entitled  to 
retired  pay;  or  (4)  to  the  heirs  or  legal  represen- 
tatives of  any  person  entitled  to  any  payment  under 
this  section  who  has  died  or  may  die  before  receiving 
such  payment.  In  the  case  of  any  person  who  sub- 
sequent to  separation  from  the  service  as  above 
specified  has  been  appointed  or  inducted  into  the 
military  or  naval  forces  of  the  United  States  and 
has  been  or  is  again  separated  from  the  service  as 
above  specified,  only  one  payment  of  $60  shall  be 
made. 

The  above  amount,  in  the  case  of  separation 
from  the  service  on  or  prior  to  the  passage  of  this 
Act,  shall  be  paid  as  soon  as  practicable  after  the 


General    P&ovisioks  211 

passage  of  this  Act,  and  in  the  case  of  separation 
from  the  service  after  the  passage  of  this  Act  shall 
be  paid  at  the  time  of  such  separation. 

The  amounts  herein  provided  for  shall  be  paid 
out  of  the  appropriations  for  "Pay  of  the  Army" 
and  "Pay  of  the  Navy,"  respectively,  by  such  dis- 
bursing officers  as  may  be  designated  by  the  Secre- 
tary of  War  and  the  Secretary  of  the  Navy. 

The  Secretary  of  War  and  the  Secretary  of  the  Regulations 
Navy,    respectively,    shall    make    all    regulations 
necessary  for  the  enforcement  of  the  provisions  of 
this  section. 

Sec.  1407.    That  the  provisions  of  section  5  of  "Bone  dry" 
the  Act  entitled  "An  Act  making  appropriations  prohibition  extended 
for  the  service  of  the  Post  Office  Department  for  cdJ^u*" 
the  fiscal  year  ending  June  30,  1918,  and  for  other 
purposes,"  approved  March  3,  1917,  relating  to  in- 
toxicating   liquors    in    interstate    commerce,     as 
amended  by  section  1110  of  an  Act  entitled  "An 
Act  to  provide  revenue  to  defray  war  expenses,  and 
for  other  purposes,"  approved  October  3,  1917,  be, 
and  the  same  are  hereby,  made  applicable  to  the 
District  of  Columbia. 

Sec.  1408.    That  every  person  who  on  or  after  War  contracts  to  be 
April  6,  1917,  has  entered  into  any  contract,  under-  ^j""^  ^^^  Commis- 
taking,  or  agreement  with  the  United  States,  or  "**"*'  *  ^queste 
with  any  department,  bureau,  officer,  commission, 
board,  or  agency  under  the  United  States  or  act- 
ing in  its  behalf,  or  with  any  other  person  having 
contract  relations  with  the  United  States,  for  the 
performance  of  any  work  or  the  supplying  of  any 
materials  or  property  for  the  use  of  or  for  the  ac- 
count of  the  United  States,  shall,  within  thirty  days 
after  a  request  of  the  Commissioner  therefor,  file 
with  the  Commissioner  a  true  and  correct  copy  of 
every  such  contract,  undertaking,  or  agreement. 


212 
Penalty 


Information  to  be 
available  to 
Commissioner 


Effective  date 


Revenue    Act 

Whoever  fails  to  comply  with  such  request  of  the 
Commissioner  shall  be  guilty  of  a  misdemeanor  and 
shall  be  punished  by  a  fine  of  not  more  than  $1,000, 
or  by  imprisonment  for  not  more  than  one  year,  or 
both. 

The  Commissioner  shall  (when  not  violative  of 
the  technical  military  or  naval  secrets  of  the  Gov- 
ernment) have  access  to  all  information  and  data 
relating  to  any  such  contract,  undertaking,  or 
agreement,  in  the  possession,  control  or  custody  of 
any  department,  bureau,  board,  agency,  officer  or 
commission  of  the  United  States  and  may  call  upon 
any  such  department,  bureau,  board,  agency,  offi- 
cer or  commission  for  a  full  statement  and  descrip- 
tion of  any  allowance  for  amortization,  obsoles- 
cence, depreciation  or  loss,  or  of  any  valuation,  ap- 
praisal, adjustment  or  final  settlement,  made  in 
pursuance  of  any  such  contract,  undertaking,  or 
agreement. 

Sec.  1409.  That  unless  otherwise  herein  spe- 
cially provided,  this  Act  shall  take  effect  on  the  day 
following  its  passage. 

Approved,  February  24,  1919 


Appendix 


Computation    Tables    for    Individual   In- 
come Taxes 

C  omputation  Tables  for  Corporation 
Taxes 

Corporation  Taxes:  1918 
Corporation  Taxes:  1919 

Comparison   of  Taxes   on   Income   from 
Corporations  and  Partnerships 


APPENDIX 

Computation  Tables  for  Individual 

Income  Taxes 

These  tables  provide  a  short  method  of  determining  the  combined 
normal  taxes  and  surtaxes  falling  on  net  incomes  of  individuals. 
They  are  based  on  fully  taxable  income  and  allow  for  the  exemption 
of  $2,000  from  the  normal  tax  which  is  accorded  to  married  men  or 
heads  of  families  without  dependents.  The  tables  do  not  take  into 
consideration  income  from  tax-free  securities  or  from  dividends  of 
corporations  taxable  on  their  net  income. 

The  rates  for  1918  and  for  subsequent  years  differ  only  as  to  the 
normal  tax.  For  1918  this  is  6  per  cent,  on  the  first  $4,000  above 
the  personal  exemption  and  12  per  cent,  on  all  income  above  this 
amount.  For  subsequent  years  these  rates  are  4  per  cent,  and  8 
per  cent,  respectively. 

How  to  Use  Tables.  Find  in  column  A  the  largest  sum  less  than 
your  total  net  income  and  multiply  the  difference  between  that  sum 
and  your  actual  income  by  the  rate  shown  on  the  same  line  in  col- 
umn F.  Add  the  result  to  the  sum  given  in  column  E.  The  result- 
ing sum  constitutes  the  total  income  tax. 

Illustration.  Take  an  income  of  $25,000  in  1918.  In  colunm  E  is 
given  the  amount  of  tax  falling  on  an  income  of  $24,000,  namely, 
$3,490.  The  rate  of  23  per  cent.,  given  on  the  same  line  in  column  F, 
is  to  be  applied  to  the  remaining  $1,000  of  income.  The  total  tax  on 
the  $25,000  is  therefore  the  sum  of  $3,490  and  $230,  or  $3,720. 

If  the  income  should  be  increased  to  $28,000  by  the  addition  of 
$3,000  income  from  dividends  and  bond  interest  subject  only  to  sur- 
taxes, the  amount  of  surtax  can  readily  be  computed  from  column  D. 
On  the  $1,000  of  income  falling  between  $24,000  and  $26,000,  the 
surtax  rate  of  11  per  cent,  applies,  and  on  the  remaining  $2,000  the 
surtax  rate  of  12  per  cent,  applies.  The  additional  tax  is  therefore 
$350  and  the  total  tax  upon  the  income  of  $28,000  is  ^,070. 

214 


/ 


Appe  NDI  X 

215 

TAX  ON  INCOME  OF  1918  PAYABLE  IN  1919 

A 

B 

C 

D 

£ 

F 

Surtax 

Combined 

Amount  of 
Net  Income 

Normal 
Tax 

Surtax 

Rate 

on  Next 
Increment 

Combined 
Normal 
and 

C^             A. 

Rate 

on  Next 
Increment 

of  Income 

Surtaxes 

of  Income 

$2,000 

$00 

^00 

0% 

$00 

6% 

6,000 

180 

00 

1 

180 

7 

6,000 

240 

10 

2 

260 

14 

8,000 

480 

60 

3 

630 

16 

10,000 

720 

110 

4 

830 

16 

12,000 

960 

190 

6 

1,160 

17 

14,000 

1,200 

290 

6 

1,490 

18 

16,000 

1,440 

410 

7 

1,850 

19 

18,000 

1,680 

650 

8 

2,230 

20 

20,000 

1,920     - 

710 

9 

2,630 

21 

22,000 

2,160 

890 

10 

3,060 

22 

24,000 

2,400 

1,090 

11 

3,490 

23 

26,000 

2,640 

1,310 

12 

3,960 

24 

28,000 

2,880 

1,550 

13 

4,430 

26 

30,000 

3,120 

1,810 

14 

4,930 

26 

32,000 

3,360 

2,090 

15 

6,450 

27 

34,000 

3,600 

2,390 

16 

6,990 

28 

36,000 

3,840 

2,710 

17 

6,650 

29 

38,000 

4,080 

3,050 

18 

7,130 

30 

40,000 

4,320 

3,410 

19 

7,730 

31 

42,000 

4,660 

3,790 

20 

8,360 

32 

44,000 

4,800 

4,190 

21 

8,990 

33 

46,000 

6,040 

4,610 

22 

9,660 

34 

48,000 

6,280 

6,050 

23 

10,330 

36 

60,000 

6,620 

6,510 

24 

11,030 

36 

62,000 

6,760 

6,990 

25 

11,760 

37 

64,000 

6,000 

6,490 

26 

12,490 

38 

66,000 

6,240 

7,010 

27 

13,260 

39 

68,000 

6,480 

7,550 

28 

14,030 

40 

60,000 

6,720 

8,110 

29 

14,830 

41 

62,000 

6,960 

8,690 

30 

16,660 

42 

64,000 

7,200 

9,290 

31 

16,490 

43 

66,000 

7,440 

9,910 

32 

17,360 

44 

68,000 

7,680 

10,660 

33 

18,230 

46 

70,000 

7,920 

11,210 

34 

19,130 

46 

72,000 

8,160 

11,890 

36 

20,060 

47 

74,000 

8,400 

12,690 

36 

20,990 

48 

.      76,000 

8,640 

13,310 

37 

21,950 

49 

78,000 

8,880 

14,060 

38 

22,930 

60 

80,000 

9,120 

14,810 

39 

23,930 

61 

82,000 

9360 

15,690 

40 

24,960 

62 

84,000 

9,600 

16,390 

41 

25,990 

63 

86,000 

9,840 

17,210 

42 

27,050 

64 

88,000 

10,080 

18,050 

43 

28,130 

66 

90,000 

10,320 

18,910 

44 

29,230 

56 

92,000 

10,660 

19,790 

45 

30,350 

67 

94,000 

10,800 

20,690 

46 

31,490 

68 

96,000 

11,040 

21,610 

47 

32,650 

69 

98,000 

11,280 

22,560 

48 

33,830 

60 

100,000 

11,520 

23,610 

62 

35,030 

64 

160,000 

17,520 

49,510 

56 

67,030 

68 

200,000 

23,520 

77,510 

60 

101,030 

72 

300,000 

35,520 

137,510 

63 

173,030 

75 

600,000 

69,520 

263,510 

64 

323,030 

76 

1,000,000 

119,620 

683,610 

66 

703,030 

77 

6,000,000 

599,520 

3,183,510 

66 

3,783,030 

77 

216 


R 

E  VE  N  UE   Act 

TAX  ON  INCOME  OF  1919  PAYABLE  IN  1920 

A 

B 

C 

D 

E 

F 

Surtax 

Combined 

Rat« 

Combined 

Rate 

Amount  of 
Net  Income 

Normal 
Tax 

Surtax 

on  Next 
Increment 

Normal 
and 

CI        L 

on  Next 
Increment 

of  Income 

Surtaxes 

of  Income 

$2,000 

$00 

$00 

0% 

$000 

4% 

5,000 

120« 

00 

1 

120 

6 

6,000 

160 

10 

2 

170 

10 

8,000 

320 

60 

3 

370 

11 

10,000 

480 

110 

4 

690 

12 

12,000 

640 

190 

5 

830 

13 

14,000 

800 

290 

6 

1,090 

14 

16,000 

960 

410 

7 

1370 

16 

18,000 

1,120 

660 

8 

1,670 

16 

20,000 

1,280 

710 

9 

1,990 

17 

22,000 

1,440 

890 

10 

2,330 

18 

24,000 

1,600 

1,090 

11 

2,690 

19 

26,000 

1,760 

1,310 

12 

3,070 

20 

28,000 

1,920 

1,660 

13 

3,470 

21 

30,000 

2,080 

1,810 

14 

3,890 

22 

32,000 

2,240 

2,090 

15 

4,830 

23 

34,000 

2,400 

2,390 

16 

4,790 

24 

36,000 

2,660 

2,710 

17 

6,270 

26 

38,000 

2,720 

3,060 

18 

6,770 

26 

40,000 

2,880 

3,410 

19 

6,290 

27 

42,000 

3,040 

3,790 

20 

6,830 

28 

44,000 

3,200 

4,190 

21 

7,390 

29 

46,000 

3,360 

4,610 

22 

7,970 

30 

48,000 

8,620 

5,060 

23 

8,670 

31 

60,000 

3,680 

6,510 

24 

9,190 

32 

62,000 

3,840 

6,990 

25 

9,830 

33 

64,000 

4,000 

6,490 

26 

10,490 

34 

66,000 

4,160 

7,010 

27 

11,170 

36 

68,000 

4,320 

7,660 

28 

11,870 

36 

60,000 

4,480 

8,110 

29 

12,590 

37 

62,000 

4,640 

8,690 

30 

13,330 

88 

64,000 

4,800 

9,290 

31 

14,090 

39 

66,000 

4,960 

9,910 

32 

14,870 

40 

68,000 

6,120 

10,560 

33 

16,670 

41 

70,000 

5,280 

11,210 

34 

16,490 

42 

72,000 

6,440 

11,890 

36 

17,330 

48 

74,000 

6,600 

12,690 

36 

18,190 

44 

76,000 

6,760 

13,310 

37 

19,070 

46 

78,000    . 

6,920 

14,060 

38 

19,970 

46 

80,000 

6,080 

14,810 

39 

20,890 

47 

82,000 

6,240 

16,590 

40 

21,830 

48 

84,000 

6,400 

16,390 

41 

22,790 

49 

86,000 

6,560 

17,210 

42 

23,770 

60 

88,000 

6,720 

18,060 

43 

24,770 

61 

90,000 

6,880 

18,910 

44 

25,790 

62 

92,000 

7,040 

19,790 

46 

26,830 

63 

94,000 

7,200 

20,690 

46 

27,890 

54 

96,000 

7,360 

21,610 

47 

28,970 

66 

98,000 

7,520 

22,550 

48 

30,070 

56 

100,000 

7,680 

23,610 

62 

31,190 

60 

150,000 

11,680 

49,510 

66 

61,190 

64 

200,000 

15,680 

77,510 

60 

93,190 

68 

300,000 

23,680 

137,610 

63 

161,190 

71 

500,000 

39,680 

263,610 

64 

303,190 

72 

1,000,000 

79,680 

683,510 

65 

663,190 

73 

6,000,000 

899,680 

3,183,510 

66 

3,583,190 

73 

Computation  Tables  for  Corporation 

Taxes 

CORPORATION  TAXES:  1918 

GROUP  I.     Corporations  whose  average  prewar  in- 
come exceeds  10%  of  present  invested  capital 

Case  1 

Average  prewar  invested  capital $30,000,000 

Average  prewar  net  income 3,800,000 

Invested  capital  for   1918 36,000,000 

Gross   income,  including  taxable  interest 

on  Liberty  bonds   65,000,000 

Deductions     68,200,000 

Net  income   6,800,000 

Wae-Peofits  and  Excess-Profits  Tax 

First  Bracket  (30%  of  net  income  in  ex- 
cess of  excess-profits  credit  and  not 
in  excess  of  20%  of  invested  cap- 
ital) 
Income  not  over  20%  of  invested  capital        6,800,000 
Deduct  excess-profits  credit: 

Specific  exemption    $3,000 

8%  of  invested  capital..         2,800,000        2,803,000 

Remainder    $3,997,000 

Tax  at  30% $1,199,100 

Second  Bracket  (65%  of  net  income  in  ex- 
cess of  20%  of  invested  capital) 
Income  over  20%  of  invested  capital . .  000 

Tax  at  65% 000 

Third  Bracket  (the  sum  by  which  80%  of 
net  income  in  excess  of  war-profits 
credit  exceeds  tax  under  first  two 
brackets) 

Income    6,800,000 

Deduct  war-profits  credit: 

Specific    exemption $3,000 

Average  prewar  income.         3,800,000 
10%    of   increase   in   in- 
vested capital 500,000        4,303,000 

Remainder    $2,497,000 

80%  of  $2,497,000 1,997,600 

Deduct  tax  under  first  two  brackets 1,199,100 


Tax  under  third  bracket 798,600 


Total  war-profits  and  excess-profits  tax $1,997,600 

Note. — The  total  tax  so  computed  is  simply  an  80%  war-profits 
tax.  The  third  bracket  is  in  reality  only  a  device  for  applying  an 
alternative  tax  under  another  name.  The  corporation  must  pay 
whichever   tax    is    the   higher — war-profits    or    excess-profits. 

217 


218  Revenue   Act 

Corporation  Income  Tax 

Income    $6,800,000 

Deduct  credits: 

Specific  exemption $2,000 

War-profits    and    excess- 
profits  tax 1,997,600 

Liberty  bond  interest...  66,300        2,065,900 

Remainder t $4,734,100 

Tax  at  12%    $568,092 

Add  war-profits  and  excess-profits  tax 1,997,600 

Total  taxes  on  corporation  income $2,665,692 

Case  2 

Average  prewar  invested  capital $3,000,000 

Average  prewar  net  income 550,000 

Invested  capital  for  1918 3,500,000 

Gross   income,  including   taxable   interest 

on  Liberty  bonds  6,250,000 

Deductions     5,500,000 

Net  income   760,000 

War-Profits  and  Excess-Profits  Tax 

First  Bracket 

Income  not  over  20%  of  invested  capital         $700,000 
Deduct  excess-profits  credit: 

Specific  exemption    $3,000 

Yo  of  invested  capital..  280,000  283,000 


Remainder    $417,000 

Tax  at  30% $126,100 

Second  Bracket 

Income  over  20%  of  invested  capital. .  50,000 

Tax  at  66% 32,500 

Total  tax  under  first  two  brackets $157,600 

Third  Bracket 

Income    750,000 

Deduct  war-profits  credit: 

Specific    exemption $3,000 

Average  prewar  income.  560,000 
10%    of   increase    in   in- 
vested capital 60,000  603,000 

Remainder    $147,000 

80%  of  $147,000 117,600 

Tax  under  first  two  brackets 167,600 

Tax  imder  third  bracket 000 


Total  war-profits  and  excess-profits  tax  $167,600 

Note. — In  most  cases  corporations  whose  earnings  bring  them 
within  the  terms  of  the  second  bracket  are  also  subject  to  the  tax 
imposed  by  the  third  bracket.  Where  prewar  earnings  and  the 
increase  in  invested  capital  were  relatively  large,  the  excess-profits 
tax  imposed  by  the  first  two  brackets  may  exceed  the  sum  com- 
puted  at  80%    under   the  third    bracket,    as    in   this    case. 


A  p  p  E  X  D  I  X  219 

CoBiPOEATiON  Income  Tax 

Income    $750,000 

Deduct  credits: 

Specific  exemption   $2,000 

War-profits    and    excess- 
profits  tax   157,600 

Liberty  bond  interest...  6,950  165,550 


Remainder     $584,450 

Tax  at   12% $70,134 

Add  war-profits  and  excess-profits  tax  157,600 


Total  taxes  on  corporation  income . .  $227,734 


GROUP  II.  Corporations  whose  average  prewar  in- 
come plus  or  minus  10%  of  the  change  in  in- 
vested capital  is  not  in  excess  of  10%  of  present 
invested  capital 

(In  these  cases  prewar  income  and  capital  do  not  affect  the 
amount  of  the  war-profits  credit.) 

Case  3 

Invested  capital  for  1918 $1,000,000 

Gross  income    420,000 

Deductions     310,000 

Net  income  110,000 


War-Profits  and  Excess-Profits  Tax 
First  Bracket 

Income  not  over  20%  of  invested  capital  110,000 

Deduct  excess-profits  credit: 

Specific    exemption $3,000 

8%  of  invested  capital..  80,000  83,000 

Remainder     $27,000 

Tax  at  30% $8,100 

Second  Bracket 

Income  over  20%  of  invested  capital. . .  000 

Tax  at   65% 000 

Third  Bracket 

Income    110,000 

Deduct  war-profits  credit: 

Specific  exemption   3,000 

10%  of  invested  capital.  100,000  103,000 

Remainder    $7,000 

80%   of  $7,000 6,600 

Tax  under  first  two  brackets 8,100 

Tax  under  third  bracket 000 

Total  war-profits  and  excess-profits  tax  $8,100 


220  Revekue    Act 

Corporation  Income  Tax 

Income    110,000 

Deduct  credits: 

Specific  exemption    $2,000 

War-profits    and    excess- 
profits  tax 8,100  10,100 


Remainder     * $99,900 

Tax  at   12% 11,988 

Add  war-profits  and  excess-profits  tax. .  8,100 


Total  taxes   on   corporation  income ....  $20,088 


Case  4 

Invested  capital  for  1918 $1,000,000 

Gross    income    1,850,000 

Deductions    1,600,000 

Net  income 250,000 


Wab-Profits  and  Excess- Profits  Tax 
First  Bracket 

Income  not  over  20%  of  invested  capital  200,000 

Deduct  excess-profits  credit: 

Specific  exemption    $3,000 

8%  of  invested  capital..  80,000  83,000 

Remainder     $117,000 

Tax   at  30% $35,100 

Second  Bracket 

Income  over  20%  of  invested  capital  . .  60,000 

Tax  at   65% 32,500 

Total  tax  under  first  two  brackets $67,600 

Third  Bracket 

Income    250,000 

Deduct  war-profits  credit: 

Specific  exemption    $3,000 

10%  of  invested  capital..  100,000  103,000 

Remainder     $147,000 

80%   of  $147,000 117,600 

Deduct  tax  under  first  two  brackets...  67,600 

Tax  under  third  bracket 60,000 

Total  war-profits  and  excess-profits  tax  $117,600 

Note. — This  total  tax  is  simply  the  80%  war-profits  tax.  The  law 
so  works  out  that  the  80%  rate  applies  to  corporations  in  this  group 
whose  invested  capital  is  $375,000  or  over  whenever  earnings  for 
1918  rise  above  12%  of  invested  capital. 

Since  the  65%  rate  applies  only  to  income  in  excess  of  20%  of 
invested  capital,  it  follows  that  corporations  of  this  class  are  in 
practice  never  subject  to  the  tax  in  the  second   bracket. 


Appendix  221 

Corporation  Income  Tax 

Income    $260,000 

Deduct  credits: 

Specific  exemption $2,000 

War-profits    and    excess- 
profits  tax   117,600  119,600 

Remainder  $130,400 

Tax  at  12% 15,648 

Add  war-profits  and  excess-profits  tax  117,600 

Total  taxes  on  corporation  income....  $133,248 

GROUP  III.     Small  Corporations 

Case  5 

Average  prewar  invested  capital $20,000 

Average  prewar  net  income 2,400 

Invested  capital  for  1918 24,000 

Gross  income 115,000 

Deductions    106,000 

Net  income  9,000 

War-Profits  and  Excess-Profits  Tax 

First  Bracket 

Income  not  over  20%  of  invested  capital  4,800 

Deduct  excess-profits  credit: 

Specific    exemption $3,000 

8%  of  invested  capital..  1,920  4,920 

Excess    of    deduction   to    apply    under 

second  bracket  120 

Tax  under  first  bracket 000 

Second  Bracket 

Income  over  20%  of  invested  capital..  4,200 

Deduct  excess  deduction  from  first 
bracket     120 

Remainder    $4,080 

Tax  at  65% 2,662.00 

Third  Bracket 

Income    9,000 

Deduct  war-profits  credit: 

Specific  exemption   3,000 

Average  prewar  income,  2,400 

10%    of    increase    in    in- 
vested capital 400  6,800 

Remainder    3,200 

80%  of  $3,200 2,660 

Tax  under  first  two  brackets 2,652 

Tax  under  third  bracket 000.00 

Total  war-profits  and  excess-profits  tax  $2,662.00 


222 


Revenue   Act 


Corporation  Income  Tax 


Income    

Deduct  credits: 

Specific  exemption    

War-profits    and    excess- 
profits    tax    


2,000 
2,652 


Remainder    ^ . . . . , 

Tax  at  12% 

Add  war-profits  and  excess-profits  tax. 

Total  tax  on  corporation  income 


9,000 


4,662 


$4,348 


621.76 
2,662.00 

$3,173.76 


Case  6 


Average  prewar  invested   capital. 

Average  prewar  net  income 

Invested  capital  for  1918 

Gross  income   

Deductions    

Net  income   , 


$50,000 

10,500 

60,000 

210,000 

185,000 

25,000 


War-Profits  and  Excess-Profits  Tax 

First  Bracket 

Income  not  over  20%  of  invested  capital  $12,000 

Deduct  excess-profits  credit: 

Specific  exemption $3,000 

8%  of  invested  capital..  4,800  7,800 

Remainder  $4,200 

Tax  at  30% 

Second  Bracket 

Income  over  20%  of  invested  capital...  13,000 

Tax  at  65% 

Tax  under  first  two  brackets 

Third  Bracket 

Income    25,000 

Deduct  war-profits  credit: 

Specific  exemption    3,000 

Average  prewar  income.  10,600 
10%    of    increase    in   in- 
vested  capital    1,000  14,600 

Remainder     $10,600 

80%   of  $10,500 8,400 

Tax  under  first  two  brackets 9,710 

Tax  under  third  bracket 

Total  tax  under  the  three  brackets 


$1,260 


8,450 
$9,710 


000 


$9,710 


Appendix  223 

Limitation  of  AMorrxT  of  Tax 

Section  302  provides  that  the  tax  shall  in  no  case  exceed  30%  of 
net  income  in  excess  of  $3,000  and  not  in  excess  of  $20,000,  plus  80% 
of  the  net  income  in  excess  of  $20,000. 

Income  not  over  $20,000 $20,000 

Deduct  specific  amount   3,000 

Remainder    $17,000 

Tax   at  30% $5,100 

Income   over   $20,000 $5,000 

Tax  at  80% 4,000 

Total  tax  as  limited $9,100 

Total  war-profits  and  excess-profits  tax...  9,100 

Corporation  Income  Tax 

Income 25,000 ' 

Deduct  credits: 

Specific  exemption $2,000 

War-profits  and  excess- 
profits  tax   9,100  11,100 

Remainder    $13,900 

Tax  at   12% 1,668 


Total  taxes  on  corporation  income $10,768 


CORPORATION  TAXES:  1919 
Case  7 

Invested  capital  for  1919 $35,000,000 

Gross    income    65,000,000 

Deductions    58,200,000 

Net   income    6,800,000 

War-Profits  and  Excess-Profits  Tax 

First  Bracket 

Income  not  over  20%  of  invested  capital        6,800,000 

Deduct  excess-profits  credit: 

Specific  exemption    $3,000 

8%  of  invested  capital..         2,800,000        2,803,000 

Remainder    3,997,000 

Tax  at  20% $799,400 

Second  Bracket 

Income  over  20%  of  invested  capital.,  000 

Tax  at  40% 000 

Total  war-profits  a,"^^  excess-profits  tax  $799,400 


224  Revenue    Act 

CottPORATioiir  Income  Tax 

Inccine    $6,800,000 

Deduct  credits: 

Specific  exemption    2,000 

War-profits    and    excess- 
profits  tax   799,400 

Liberty  bond  interest  in- 
cluded in  gross  income  66,300  867,700 


Remainder     $5,932,300 

Tax  at   10% 693,230 

Add  war-profits  and  excess-profits  tax.  799,400 


Total  taxes  on  corporation  income $1,392,630 


Case  8 

Invested  capital  for  1919 $3,500,000 

Gross  income   6,250,000 

Deductions    6,600,000 

Net  income  750,000 


Wak-Profits  and  Excess-Pbofits  Tax 

First  Bracket 

Income  not  over  20%  of  invested  capital         $700,000 
Deduct  excess-profits  credit: 

Specific  exemption    $3,000 

Yo  of  invested  capital..  280,000  283,000 


Remainder    $417,000 

Tax  at  20% $83,400 

Second  Bracket 

Income  over  20%  of  invested  capital. .  50,000 

Tax  at  40% 20,000 


Total  war-profits  and  excess-profits  tax  $103,400 


Cooporation  Incobie  Tax 

Income    760,000 

Deduct  credits: 

Specific  exemption    $2,000 

War-profits    and    excess- 
profits    tax    103,400 

Liberty  bond  interest  in- 
cluded in  gross  income  5,950  111,350 


Remainder     $638,650 

Tax  at  10% 63,865 


Total  taxes  on  corporation  income $167,265 


Comparison  of  Taxes  on  Income  from 
Corporations  and  Partnerships 

Partners  are  taxed  on  their  share  of  partnership  earnings,  whether 
distributed  or  not.  Stockholders  of  corporations  are  taxable  only  on 
distributed  earnings  unless  it  should  appear  to  the  Commissioner  that 
earnings  are  being  held  in  a  business  merely  to  avoid  the  surtaxes. 

In  the  following  comparison  of  1918  taxes,  it  is  assumed  that  the 
corporation's  entire  net  income  remaining  after  the  payment  of  taxes 
is  distributed  and  therefore  subject  to  surtaxes  in  the  hands  of  the 
shareholders.  It  is  further  assumed  that  the  business  is  owned  equally 
by  four  shareholders  or  partners,  whose  sole  income  is  derived  from 
the  business.  The  capital  stock  tax  on  corporations  is  not  taken 
into  consideration. 

CASE  9. 
Invested  capital  and  income  as  in  Case  1. 

Taxes  on  Income  fhom  Corporation 

Net    income    $6,800,000.00 

Total  taxes  on  corporation  income  (from  Case  1) 2,565,692.00 

Net  income  after  payment  of  taxes 4,234,308.00 

Share  of  each  four  stockholders,  if  distributed 1,058,577.00 

Individual  surtaxes  on  $1,058,577 621,686.06 

Aggregate  surtaxes  on  four  stockholders,  if  all  earn- 
ings are  distributed  2,486,34050 

Add  taxes  on  corporation 2,665,692.00 

Aggregate  taxes  on  income  from  corporation 6,052,032.20 

Percentage  ratio  of  aggregate  tax  to  corporation's  net 
income  if  all  earnings  are  distributed 74.3% 

Percentage  ratio  of  tax  to  corporation's  net  income  if 
no  earnings  are  distributed 37.78% 

Taxes  on  Income  from  Partnership 

Net  income  $6,800,000.00 

Share  of  each  four  partners 1,700,000.00 

Total  income  tax  on  $1,700,000 1,242,030.00 

Aggregate  tax  on  four  partners 4,968,120.00 

Percentage   ratio   of   aggregate    tax    to   income    from 

partnership    73.06% 

225 


226  Revenue    Act 

CASE  10. 
Invested  capital  and  income  as  in  Case  4. 

Taxes  on  Income  from  Corporation 

Net  income  $250,000.00 

Total  taxes  on  corporation  income 133^48.00 

Net  income  after  payment  of  taxes $116,762.00 

Share  of  each  four  stockholders,  if  distributed 29,188.00 

Individual  surtaxes   on  $29,188 1,704.44 

Aggregate  surtaxes  on  four  stockholders,  if  all  earn- 
ings are  distributed    6,817.76 

Add  taxes  on  corporation 133,248.00 

Aggregate  taxes  on  income  from  corporation $140,065.76 

Percentage  ratio  of  aggregate  tax  to  corporation's  net 

income  if  all  earnings  are  distributed 56.03% 

Percentage  ratio  of  tax  to  corporation's  net  income  if 
no  earnings  are  distributed 53.3% 

Taxes  on  Income  from  Partnership 

Net  income  $250,000.00 

Share  of  each  of  four  partners 62,500.00 

Total  income  tax  on  $62,500 15,860.00 

Aggregate  tax  on  four  partners 63,440.00 

Percentage   ratio    of   aggregate   tax    to    income    from 

partnership    25.38% 


INDEX 


Page 

Accounting  for  income  tax..  20 
Additional  or  surtax  rates..  16-19 
Administrative  provisions:  ..   187 

Collector's   duties    199 

Income  tax,  payment  of . . .     57 

Individuals'  duties  200 

Information  not  made  pub- 
lic       199 

Receipts  for  taxes   62 

Admissible  assets  defined...     77 

Admissions   tax :    141 

Admission  defined    143 

Cabarets    142 

Exemptions     143 

Free  admissions   141 

Penalties    143 

Advisory  tax  board 188 

Alcohol  (see  Distilled  Spirits)  110 
Aliens      (see      Non-resident 

Aliens)    30 

Ammunition,  etc 146 

Amusement  places  167 

Appropriations    187 

Art  products  148 

Assessments    203 

Assistant  to   Commissioner . .   187 

Auto  accessories  145 

Automobiles  and  auto  trucks  145 
Automobiles,  passenger,  rent- 
ed for  hire 158 

Beverages :    107 

Beer    116 

Brandy   118,  128 

Champagne  119 

Distilled  spirits   107,  116 

Gin    113,  129 

Near-beer    130 

Soda  fountains    131 

Soft  drinks  131 

Waters   131 

Wines    117-126 

Basis    for    determining    gain 

or  loss   11 

Boats,  pleasure: 

Purchase  of   147 

Use  of 160 

Bonds,  indemnity  and  surety  174 

Bonds  of  indebtedness 174 

Bonds  of  U.  S.  as  surety...  205 


Page 

Borrowed  capital: 77 

Definition  of 77 

Not    included    in    invested 

capital    79 

Bowling   alleys    and   billiard 

rooms   158 

Brandy  (see  Distilled  Spirits) 

118,  128 
Brewers  and  liquor  dealers..  158 
Brokers: 

Returns  for  income  tax...     64 
Special  tax  155 

Cabaret,  admissions  142 

Cable  messages  100 

Cameras  146 

Candy  146 

Capital  stock,  stamp  tax  on 

issue  or  sale  of 175 

Capital  stock  tax  (see  Special 

Taxes)    154 

Carpets    149 

Casualty  insurance 105 

Certificates    of   indebtedness, 

use  of  to  pay  taxes . .   197 
Checks  in  payment  of  taxes . .  197 

Chewing  gum  146 

Child  labor,  tax  on  employ- 
ment of 182-186 

Cigar  and  cigarette  holders. .   146 
Cigar  and  cigarette  manufac- 
turers     159-160 

Cigarettes  (see  Tobacco). 133,  134 

Cigarette  packages 134 

Cigarette  papers 136 

Cigars  (see  Tobacco) 133 

Circuses  157 

Citation  titles 209 

Citizens  of  U.  S.  possessions     67 

Claims  (see  Refunds) 197 

Collection   of    foreign   items, 

license  for 67 

Commissioner      of      Internal 

Revenue:   6 

Powers  of  191 

Returns  made  by 203 

Salary  of 187 

Commutation  tickets    100 

Concert  halls   156 

Consolidated     corporate     in- 
come tax  returns . .  55-57 

227 


228 


Revenue    Act 


Page 
Consolidations,        war-excess 

profits  tax  on 82-84 

Contracts  affected  by  taxes. .   195 

Contributions   or   gifts 27 

Conveyances    179 

Co-operative  societies 445 

Cordials  (see  Distilled  Spirits)  114 
Corporations : 
Capital  stock  tax  on   (see 

Special  Taxes)    154 

Income  tax  on  (see  Income 

Tax,  Corporations) .     43 
Personal  service,  defined ...       8 
War-profits     and     excess- 
profits  tax  (see  War- 
profits    and    Excess- 
profits  Tax)   69 

Cosmetics  1^2 

Courts,  jurisdiction  of 204 

Credits  allowed  for  income 
tax: 

Corporations  52 

Individuals   29 

Non-resident  aliens 30 

Taxes  paid 38,  63 

Credits  allowed  for  war-ex- 
cess-profits tax: 

Excess-profits  credit  75 

War-profits  credit  74 

Customshouse  brokers 166 

Dealers  in  drugs 162 

Debts,    worthless,    deduction 

of 25,  48 

Deductions    allowed    for    in- 
come tax: 

Corporations   46-52 

Individuals    24-28 

Non-resident  aliens 28,  30 

Definitions: 

Admissible  assets  77 

Admissions    143 

Borrowed  capital   77 

Collector 6,  87 

Commissioner   6 

Corporation 6 

Dividend 9,  69 

Domestic   6 

Executor    87 

Fiduciary    8 

Fiscal  year  8,  69 

Foreign   6 

Government  contract 6 

Gross  income 20-23,  46 

Inadnussible  assets 77 

Intangible  property 77 

Invested  capital  78 


Page 
Definitions — continued 

Military  or  naval  forces  of 

U.  S 7 

Net  income  20,  45 

Net  losses  12 

Paid  and  paid  or  accrued      9 

Person   6 

Personal    service    corpora- 
tion         8 

Present  war  7 

Prewar  period 73 

Revenue  Act  of  1916 6 

Revenue  Act  of  1917 6 

Secretary 6 

Tangible  property  77 

Tfixable  year 8,  69 

Taxpayer 6 

Termination  of  war 7 

United  States 6 

Withholding  agent  8 

Dependents,  income  tax   ex- 
emption for  30 

Depletion     of     mineral     re- 
sources or  timber  26,  40 
Depreciation     and    obsolesc- 
ence   25,  48 

Deputy  commissioners   187 

Distilled  spirits:   107 

Alcohol  Ill 

Beverages  107 

Brandy  118,  128 

Cordials 114 

Fermented  liquor  116 

Floor  taxes  113,  119 

Gin 113,  129 

Imports   110 

Penalties 115,  126,  129 

Perfumes  109 

Prohibition,  period  of  . . .     107 

Rectifiers  113 

Registered  distilleries 110 

Regulation  of  distilleries..  116 

Stamps 115 

Surveys 127 

Wine-production     regula- 
tions ...121,  125-126,  128 

Wines 117,  124 

Withdrawals,  free  of  tax . .  127 
Distribution  of  profits,  when 

taxable   9 

Dividends:  9-10 

Deemed  to  be  paid  out  of 

taxable    earnings ....       9 

Defined 9 

Distribution,    as    of    what 

year's  earnings 10 

Liqiddation  10 

Return  of  payments 64 


Index 


229 


Paok 

Dividends — continued 

Stock  dividends  taxable...     10 
Drafting  service,  legislative.  .189 

Drafts  or  checks,  time 178 

Dues  and  membership  fees . .   143 

EflFective  date  212 

Electric  fans   146 

Entries  of  goods  at  Customs 

House 179 

Estates    and    trusts,    income 
tax  on    (see   Income 

Tax)    32-34,  40 

Estate  tax: 

Definitions:    87 

Collector    87 

Executor   87 

Exemption    of    estates    of 
persons  dying  in  mil- 
itary  or   naval   ser- 
vice       89 

Gross  estate,  value  of 89 

Net  estate,  value  of: 

Non-residents  92 

Residents  90,  92 

Notice  by  executor 93 

Payment  of  tax: 96-98 

Default 96 

Receipts 95 

Tax  a  lien  for  10  years. .     97 

When  tax  is  due 94 

Penalties   98 

Rates   87 

Returns:    94 

By  collector  94 

Transfers  or  trusts  in  con- 
templation of  death.     97 
Excess-profits  tax  (see  War- 
profits    and   Excess- 
profits  Tax) 69 

Exchanges  of  property,  pro- 
fits from 11 

Excise  taxes : 145 

Ammunition,  etc 146 

Art  products 148 

Auto  accessories  145 

Automobiles  and  auto  trucks  145 

Boats,  pleasure 147 

Cameras 146 

Candy 146 

Carpets,  etc 149 

Chewing  gum 146 

Cigar  and  cigarette  holders  146 

Cosmetics 152 

Daggers,  etc 146 

Electric  Fans 146 

Fans  149 

Firearms,  etc 146 


Paob 
Excise  taxes — continued 

Fur  products 147 

Hats  and  caps 149 

Hosiery   150 

Jewelry    150 

Kimonos,  etc  150 

Knives,  etc 146 

Lighting  fixtures 149 

Liveries   147 

Medicinal  preparations  . . .  162 
Motion  picture  film  . . .  147,  161 

Motorcycles 146 

Musical  instruments 146 

Neckwear    149 

Patent  medicines 152 

Perfumes   162 

Photographic  materials  . . .   146 

Picture  frames   149 

Pipes    146 

Purses,  etc 149 

Shirts  150 

Shoes,  etc 149 

Slot  machines    146 

Smoking  jackets,  etc 149 

Sporting  goods 146 

Sporting  habits 147 

Thermos  bottles 146 

Toilet   articles   162 

Toilet  soaps  147 

Trunks  149 

Umbrellas   149 

Underclothing,  etc 160 

Valises,  etc 149 

Waistcoats    149 

Exhibitions  and  shows 167 

Expenses,  business 24,  46 

Exports,  exemption  from  tax  194 
Express  transportation  ....  99 
Extension  of  time  for  filing 

returns  203 

False  and  fraudulent  returns  69 

Fermented   liquor    (see  Dis- 
tilled Spirits) 116 

Films,  motion  picture. .  .147,  151 

Fiduciary: 

Defined    8 

Returns  40 

Fire  insurance 106 

Fiscal  year: 13-16 

Defined 8 

Partnerships  31 

Floor  taxes,  returns 192 

Foreign  corporations: 

Deductions   52 

Exemptions 75 

Withholding  at  source  ....  63 


230 


Revenue    Act 


Page 

Foreign  governments,  ex- 
emption of  income  of    22 

Foreign    items,     license     for 

collection  of 67 

Gain  or  loss  for  income  tax, 
basis  for  determin- 
ing      11 

Gifts  and  bequests,  etc.,  ex- 
empt from  income 
tax    21 

Gifts       and       contributions, 

charitable,  etc.  ...27,  33 
Gin  (see  Distilled  Spirits)  113, 129 
Gold,    exemption    of    income 

derived  from  mining  73 

Government  contract  defined  6 
Gross  income: 

Corporations 46 

Individuals   20 

Harrison       Narcotic       Law, 

amended     162-168 

Ice  cream   131 

Inadmissible  assets,  deduc- 
tion of,  from  invest- 
ed capital   79 

Defined 77 

Income  tax: 
Accounting    methods     and 

periods   20 

Administrative  provisions.     67 

Amortization 25,  48 

Basis  for  determining  gain 

or  loss 11 

Bequests    21 

Citizens  of  U.  S.  possess- 
ions       67 

Collection  of  foreign  items     67 
Collection       of       tax       at 

source 36,  53 

Concealment    of    property, 

fraudulent   60 

Contributions  or  gifts 27,  33 

Corporations; 

Affiliated   55 

Conditional     and     other 

exemptions    44 

Consolidated  returns 55 

Credits  allowed 52,  53 

Deductions  allowed 46,  52 

Exempt   44 

Exempt  income 46 

Foreign  corporation ...  52,  53 

Gross  income  defined 46 

Insurance  companies.  .46,  49 


Page 
Income  tax — continued 
Corporations — continued 

Items  not  deductible  ...  62 

Net  income  defined 46 

Personal    service    corpo- 
rations : 8 

Exempted  as  such  ....  45 
Taxed  as  partnerships  32 
Profits  taxable  to  stock- 
holders    35 

Railroads  under  Federal 

control   43 

Rates  for  1918  and  suc- 
ceeding years 43 

Returns,  basis 54 

Time    and    place     for 

filing   57 

Withholding  at  source..  63 
Credits  allowed: 

Corporations  52 

Individuals   29 

Non-resident  aliens 30 

Partnerships  31 

Credit  for  taxes: 

Corporations  63 

Individuals   38 

Dealings   in  property 11 

Debts,  bad  25,  48 

Deductions : 

Corporations   46-52 

Estates  and  trusts 33 

Individuals  and  partner- 
ships     24-29 

Insurance  companies  . . . 

Net  losses  12 

Definitions: 

Dividends    9 

Fiduciary    8 

Fiscal  year 8 

Gross  income   20-23 

Net  income 20 

Paid  or  accrued   9 

Personal    service    corpo- 
ration       8 

Taxable  year 8 

Withholding  agent 8 

Dependents,  exemption  for  30 

Depletion   26,  49 

Depreciation    and    obsoles- 
cence   25,  48 

Dividends: 

Defined 9 

Distribution  out  of  what 

year's  earnings 10 

Exempt  from: 

Corporation  income  tax  48 

Individual  normal  tax  29 


Index 


231 


Page 

Income  tax — continued 
Dividends — continued 

Liquidation   10 

Paid      out     of     taxable 

earnings   9 

Personal    service    corpo- 
ration        48 

Return  of  payments 64 

Stock  dividends  are  tax- 
able       10 

Estates  and  trusts: 32-34 

Credits  allowed  benefici- 
ary       34 

Deductions   of   contribu- 
tions, etc 33 

Fiduciary  returns 40 

Taxable  income 32 

Where    beneficiary   must 

pay  tax 34 

Where     fiduciary     must 

pay  tax 33 

Fiduciaries: 

Defined    8 

Duties  of 33 

Returns  40 

First  taxable  year 8 

Fiscal  year: 

Defined 8 

Different  tax  rates IS,  31 

Foreign  items,  license   for 

collection  of  67 

Foreign    governments,    in- 
come of  exempt 22 

Gain  or  loss,  basis  for  de- 
termining       11 

Gifts   21 

Gross  income 20,  46 

Holding  companies 35 

Individuals: 

Accounting  methods  and 

periods   20 

Credit  for  taxes   38 

Credits  allowed 29 

Deductions  allowed  .. .  .24-29 

Gross  income 20 

Income  exempt  from  tax 

21-23 
Items  not  deductible  ...     29 
Mines  and  wells,  limita- 
tion   of    tax    on    in- 
come from  sale  of..     19 

Net  income  defined  20 

Non-resident    aliens: 30 

Deductions  allowed  ...     28 

Exempt  income 30 

Personal  exemption ...     29 

Withholding  at  source    36 

Normal  tax  for  1918 16 


Page 

Income  tax — continued 
Individuals — continued 
Normal    tax    for    subse- 
quent years 16 

Payment  of  tax  at  source: 

Non-resident  aliens ...     36 
"Tax-free    covenant** 

bond  interest 36 

Profits    of    corporations 
taxable  to  stockhold- 
ers        35 

Returns    39,  41,  42 

Surtax  rates   16-20 

Understatements  on  re- 
turns       42 

Information  at  source....     64 
Installment  tax  payments.     57 

Insurance  companies 46,  49 

Interest: 

Deductible 24,  47 

Federal       Farm      Loan 

bonds    21 

Paid  on  indebtedness 24,  47 

State  and  municipal  ob- 
ligations       22 

U.  S.  obligations. .  .22,  29,  52 

Inventories   12 

Items  exempt  from  tax. .  .21-23 
Items  not  deductible: 

Corporations   52 

Individuals   29 

Liquidation  dividends 10 

Losses : 

Basis  of  computing  ....     11 

Corporations  48,  51 

Individuals 26,27 

Net  12 

Mines  and  wells 19,  26,  49 

Net  income  defined 20 

Net  losses,  deduction  of . . .     12 
Non-resident   aliens: 

Credits   30 

Deductions    28 

Exempt  income 23 

Gross  income  defined ...     23 

Personal  exemption   30 

Withholding  at  source...     36 
Normal  tax  on  individuals     15 

Oil  and  gas  wells 19,  26,  49 

Paid  or  accrued  defined. . .       9 

Partnerships:   31 

Credits  allowed  members    31 

Fiscal  year 31 

Members  taxed  as  indi- 
viduals       31 

Net  income 32 

Returns  40 


232 


Revenue    Act 


Page 
Income  tax — continued 

Parts  of  income  subject  to 
rates     for     different 

years 16 

Payment  of  tax 67-62 

Payment  of  tax  at  source: 

36-38 

Non-resident  aliens 36 

"Tax-free  covenant"  bond 

interest 36 

Penalties   63 

Personal  exemption   29 

Personal    service    corpora- 
tion: 

Defined 8 

Exempt  as  such 46 

Taxed    in   same    manner 

as  partnership 32 

Porto  Rico  and  Philippine 

Islands   67 

Profits  of  corporations  tax- 
able to  stockholders    36 
Property,  gain  or  loss  from 

exchanges  of 11 

Publication  of  statistics ...     66 
Rates  of  tax: 

Corporation  income 43 

Fiscal  year   with   diflPer- 

ent  rates  15 

Normal    16 

Surtax    16-19 

Receipts  for  taxes 62 

Refunds  62,  197 

Returns : 
Accounting  period 

changed   41 

Broker's  64 

Consolidated  65-67 

Corporation    64 

Extension     of     time     to 

file  42 

Fiduciary    40 

Individual 39 

Information  at  source. . .     64 

Inspection  of 66 

Partnership    40 

Payments  of  dividends..     64 

Public  records 65 

Time  and  place  for  fil- 
ing   42,  67 

Understatements  42 

Statistics,  publication  of..  66 
Stock  dividends,  taxable. .  10 
Surtax   on   individuals...  .16-19 

Taxable  year  defined 8 

Taxes,  credit  for 38,  63 


Page 
Income  tax — continued 
Tax-free  covenant  bond  in- 
terest   36,  63 

Undistributed  profits,  tax- 
able to   stockholders    35 
Withholding  agent  defined      8 
Withholding  at  source: 

Foreign  corporations  ...  63 
Non-resident  aliens  ....  36 
Tax-free  covenant  bond 

interest  36,  53 

Individuals,    income    tax    on 

(see  Income  Tax)...     15 

Information  at  source 64 

Inheritance  tax     (see  Estate 

Tax)    87 

Installment  tax  payments ...     57 
Insurance  policies,  tax  on: 

Casualty 105 

Exemptions  106 

Fidelity  or  guaranty 174 

Life  104 

Marine,  inland,  and  fire.. . .   105 

Payment   106 

Returns  106 

Stamp  tax  on 174 

Intangible  property  defined . .    77 
Interest : 

Exempt  from  income  tax. 21, 46 

Paid,  deduction  of 24,  47 

Inventories 12 

Invested  capital  (see  War- 
profits  and  Excess- 
profits  Tax)   77 

Items    exempt    from    income 

tax   21-23 

Items  not  deductible  for  in- 
come tax: 

Corporations 52 

Individuals  29 

Jewelry   150 

Judgments,  payment  of 199 

Jurisdiction  of  courts 204 

Leaf  tobacco,  dealers  in..  137-140 

Leased  wire  service 101 

License  for  collection  of  for- 
eign items 67 

Life  insurance: 

Policies,   proceeds    exempt 

from  income  tax 21 

Premiums,  return,  exempt 

from  income  tax. ...     21 
Premiums    not    deductible 

for  income  tax.... 29,  52 

Tax  on 104 

Liquidation  dividends  10 


IXDEX 


233 


Paos 

Losses ; 

Basis  for  determining 11 

Deduction  of   .25,  48 

Due  to  shrinkage  of  in- 
ventory value 27,  51 

Net  loss,  deduction  of 12 

Marine,  inland,   and  fire  in- 
surance       106 

Marine  insurance  companies, 

deductions  60 

Medicines    162 

Mileage  books   101 

Mines,  oil  and  gas  wells: 
Deduction  for  depletion.  .26,  49 
Income  tax  on  profits  from 

sale  of 19 

War-profits  and  excess- 
profits  tax  on  profits 
from  sale  of 86 

Motion  picture  films 147,  151 

Mutual  insurance  companies, 

deductions  60 

Narcotic  Act  amended. .  .162-166 
Near-beer  (see  Beverages)  . .  130 
Net  income: 

Corporations 45 

Individuals   20 

War-profits  and  excess- 
profits  tax 76 

Net  losses,  deduction  for  in- 
come tax 12 

Non-resident  aliens: 
Credits  and  deductions  al- 
lowed         28 

Gross  income 23 

Personal  exemption 30 

Normal  income  tax  on  indi- 
viduals        16 

Obsolescence 25 

Oil  and  gas  wells: 
Deductions  for  depletion.. 26, 49 
Income  tax  on  profits  from 

sale  of  19 

War-profits  and  excess- 
profits  tax  on  pro- 
fits from  sale  of 86 

"Paid"  and  "Paid  or  accrued" 

defined  9 

Parcels  post 180 

Parlor-car  service   100 

Partnerships : 

Income   tax   on    (see    In- 
come Tax) 31 


Page 

Partnerships — continued 
War-profits     and     excess- 
profits   tax  paid ....     86 
When    taxed    as    corpora- 
tion     82-84 

Passage  tickets 179 

Pawnbrokers    156 

Payments: 
By  check  or  U.  S.  certifi- 
cates   of    indebted- 
ness    197 

Income  tax  67 

Income  tax  at  source: 

Foreign  corporations..  63 
Non-resident  aliens  ...  36 
"Tax-free  covenant" 

bond  interest 36 

War-profits     and     excess- 
profits  tax    86 

Penalties : 

Admissions  and  dues 143 

Excise  taxes   148,  161 

False    and    fraudulent   in- 
come tax  returns ...     63 
Fraud    or    misrepresenta- 
tion   204 

Furnishing  information   . .  199 
General  provisions . . .  192,  203-4 

Income  tax 63 

Transportation 104 

Refundable  197 

Special  taxes 162 

Stamp   taxes 171 

Perfumes   109,  162 

Personal  exemption: 

Individuals   29 

Non-resident  aliens SO 

Personal      service      corpora- 
tions : 

Defined 8 

Exempt  as  such   from  in- 
come tax 32,  45 

War-profits     and     excess- 
profits  tax 86 

Philippine  Islands,  income  tax 

in   67,  208 

Pipe-line  oil  transportation 

100,  102 

Playing  cards   180 

Political   subdivisions  of 
United  States: 
Income  of  is  exempt  from 

income  tax   22 

Porto  Rico,  income  tax  in. .  67,  208 
Postal    rates,    first-class    re- 
duced    209 

Powers  of  attorney  179 

Prewar  period  defined 73 


234 


Re  7EK  UE   Act 


Page 
Produce,     sales     of     on     ex- 
change      177 

Prohibition,    distilled    spirits 
in  warehouse  during 

107-109 

Promissory  notes 178 

Property,  gain  or  loss   from 

exchange  of   ,. .     11 

Proxies  179 

Pullman  service 100 

Radio  messages 100 

Receipts  for  taxes 62 

Refunds  62,  194,  197 

Regulations,      authority      to 

make   193 

Reorganizations,    war-profits 
and    excess-profits 

tax  on 82-84 

Repealing  sections  207 

Returns : 200 

Acknowledgment    193 

Accounting  period  changed    41 

Brokers'  64 

By  collectors   200 

Consolidated    55-57 

Corporation 54 

Dividends  paid   64 

Excise  tax  148,  151 

Fiduciary 40 

Individual 39 

Information  at  source 64 

Information  by  brokers 64 

Inspection  of  65 

Partnership 40 

Public  records  65 

Time  and  place  of  filing.  .42,  67 

Understatements  42 

War-profits     and     excess- 
profits  tax 86 

Riding  academies  158 

Sales : 

Mines,  oil  and  gas  wells.  .19,  86 
Property,  basis  of  gain  or 

loss   11 

Saving  clause 208 

Season   tickets,    railway,    for 
trips  of  less  than  30 

miles 100 

Ship  brokers 156 

Shooting  galleries 158 

Snuff  (see  Tobacco) 135-136 

Soda   fountains    (see    Bever- 
ages)     131 

Soft  drinks    (see  Beverages)  131 
Source: 

Returns  of  information...     64 
Withholding    36,   63 


Page 

Special  taxes: 

Amusement  places  157 

Automobiles      rented      for 

hire    158 

Boats,  pleasure 160 

Bowling  alleys  and  billiard 

rooms  158 

Brewers,  distillers   and  li- 
quor  dealers    158 

Brokers   155 

Capital  stock  tax: 154 

Domestic   corporations..  154 

Exemptions    154 

Foreign  corporations  ...   154 
Insurance   companies. . . .  156 

Cigar  manufacturers 159 

Cigarette  manufacturers . .    160 

Circuses   157 

Concert  halls,  tlieatres,  etc.  156 

Corporations 164 

Credit  for  taxes: 

Assessed  under  Revenue 

Act  of  1916 161 

Assessed  under  Revenue 

Act  of  1917 161 

Customshouse   brokers  ....   166 

Dealers  in  drugs 162 

Exhibitions    and   shows 157 

Harrison    Narcotic    Act 

amended  162-168 

Passenger  autos  rented  for 

hire   158 

Pawnbrokers    166 

Penalties    162 

Pleasure  boats 160 

Public  exhibitions  or  shows  157 

Repeal  of  prior  acts 168 

Riding  academies 158 

Ship   brokers    166 

Shooting  galleries 158 

Theatres,     museums,     con- 
cert halls,  etc 156 

Tobacco  manufacturers... .   159 

Stamp  taxes : 170 

Administrative  provisions..  170 

Bonds  of  indebtedness  ....  174 
Bonds,  indemnity  and 

surety  174 

Cancellation  of  stamps ....  172 
Capital  stock: 

Issue  of 176 

Sales  or  transfers  of 175 

Conveyances 179 

Drafts  or  checks,  time....  178 

Exemptions 170 

Entry  of  goods  at  customs 

house    179 

Entry  for  withdrawals  . . .  179 


Index 


235 


Page 

Stamp  taxes — continued 

Insurance   policies    180 

Parcels  post 180 

Passage  tickets 179 

Penalties   171 

Playing  cards 180 

Power  of  attorney 179 

Produce,   sales   of,   on   ex- 
change       177 

Promissory  noteij 178 

Proxy  179 

Restamping    197 

Stamps,    distribution     and 

sale    172-174 

Stamps,  who  shall  affix...   181 

Stateroom  service 100 

Statistics  of  income  tax 66 

Stock  dividends,  taxable 10 

Stock  exchanged  in  reorgani- 
zations         11 

Suits  for  collection  of  tax 60 

Sureties  on  bonds 205 

Surtax  on  individuals: 16-19 

Undistributed  profits   sub- 
ject to  35 

Tangible  property  defined ...     77 

Taxable  year  defined 8 

Taxes: 

Credit  for  foreign 38,  63 

Deductible  from  income.  .24,  48 

Payment  of 57,  197 

Withholding  at  source  . .  .36,  53 
"Tax-free    covenant"    bond 

interest,  withholding 

at  source   36,  53 

Telegraph  and  telephone  ser- 
vice       101 

Theatres,  museums  and  con- 
cert halls 156 

Titles  of  Revenue  Acts 209 

Tobacco :    133 

Cigarettes 133,  134 

Cigarette  paper  and  tubes  136 

Cigars    133 

Floor  taxes 136 

Leaf  tobacco,  dealers  in  137-140 
Packages,  regulations  gov- 
erning   134-135 

Penalties    137 

Snuff 135 

Tobacco  135 

Tobacco  manufacturers 159 

Transfers  of  stock 175 

Transportation     and     other 

facilities 99-104 

Express   99 

Freight    99 


Page 
Transportation  and  other  fa- 
cilities— continued 
Governmental   exemption..    101 
Incidental  services  for  hire  102 

Mileage  books   101 

Oil 100 

Passenger   99 

Penalty  for  overdue  tax..  104 
Pipe  line  transmission ....   100 
Pullman  accommodations . .   100 
Returns,  payment  and  re- 
funds       103 

Telegraph,  telephone,  cable 

and  radio  service...   100 
Trusts,  income  tax   on    (see 
Income  Tax,  Estates 
and  Trusts)  32-34 

Understatements  in  returns.  42 
Undistributed  profits  subject 

to  surtax 35 

United  States,  definition  of.  6 

Violations,  reporting  of 199 

Virgin  Islands 190 

War-profits       and       excess- 
profits   tax : 69 

Applies  only  to  corpora- 
tions     69 

Assessment  on  basis  of 
representative  cor- 
porations    80 

Assets: 

Admissible    77 

Inadmissible   77,  79 

Transfers    84 

Borrowed  capital 77 

Changes  of  ownership 84 

Consolidations    82 

Credit  for  tax  paid  under 

Revenue  Act  of  1917  85 
Credits : 

Excess-profits  75 

War-profits   74 

Definitions :    69 

Admissible  assets 77 

Borrowed  capital 77 

Inadmissible    assets 77 

Intangible  property 77 

Prewar  period 73 

Tangible  property 77 

Exceptional  cases 80,  82 

Exempt  corporations 73 

Fiscal   year: 

Beginning    in    1917    and 

ending  in  1918 85 

Beginning    in    1918    and 

ending  in   1919 85 


236 


Revenue    Act 


Page 

War-profits  and  excess-profits 
tax — continued 
Fiscal  year — continued 
Partnerships     and     per- 
sonal service   corpo- 
rations        86 

Foreign  corporations  ....  76,  80 
Gold     production,    exemp- 
tion of  corporations 

engaged  in 73 

Government  contracts,  cor- 
porations      deriving 

income  from 70 

Imposition  of  tax 69 

Income  derived  both  from 
invested  capital  and 

personal  service 72 

Invested  capital : 77 

Average    79 

Average   of   prewar  pe- 
riod      79 

Deduction  of  inadmissi- 
ble assets 79 

Definitions  77 

Exceptional  cases 80,  82 

Items   included 78 

Items  not  included 79 

Representative    corpora- 
tions        80 

Limitation     on     maximum 

amount  of  tax 72 

Mines  and  oil  or  gas  wells, 

profits  from  sale  of.     80 
Net  income: 

Average  prewar 76 

For  1911,  1912,  and  1913     76 

For  taxable  year 76 

Partnership,  when  taxed  as 

corporation    83 

PartnersWps  not  taxable 
on  income  earned 
since  January  1, 
1918   86 


Page 
War-profits  and  excess-profits 
tax — continued 

Payment  of  tax 86 

Personal    service    corpora- 
tion, return 86 

Prewar  period... 73,  74,  76,  79 

Property: 

Intangible 77,79 

Tangible 77,78 

Railroads    under    Federal 

control   71 

Rates  for  1918 69 

Rates  for  subsequent  years  70 

Reorganizations :    82-84 

Corporations   82 

Partnerships  as  corpora- 
tions     83 

Transfer  of  assets 84 

Returns   86 

Specific  exemption  for  pe- 
riod of  less  than  12 

months 73 

Waters,  mineral  (see  Bever- 
ages)      131 

Wells  and  mines,  profits  from 
sale  of: 

Income  tax 19 

War-profits   and   excess- 
profits  tax 86 

Wines  (see  Distilled  Spirits) 

117,  126 

Withholding  agent  defined. . .       8 

Withholding   at   source : 

Foreign  corporations   ....     53 

Non-resident  aliens 36 

"Tax-free   covenant"    bond 

interest  36 

Workmen's  Compensation 
Acts,  income  re- 
ceived under,  exempt    22 


National  Bank  of  Commerce 
in  New  York 

ESTABLISHED    1839 


J.  Ho^pvard  Ardrcy 
Guy  Emerson 

Herbert  P.  Howell 


H.  P.  Barrand 
A.  F.  Broderick 
L.  P.  Christenson 
Gaston  L.  Gtegan 
John  J.  Keenan 


President 
James  S.  Alexander 

Vice-Presidents 

R.  G.  HutcKins,  Jr. 
Louis  A.  Keidel 
D.  H.  G.  Penny 

Cashier 
RicKard  W.  Saunders 

Assistant  Cashiers 

Edward  W.  McDonald 
A.  F.  Maxwell 
Don  L.  Moore 
A.  J.  Oxenham 
R.  H.  Passmore 
Everett  E.  Risley 


JoKn  E.  Rovensky 
Faris  R.  Russell 
Stevenson  E.  Ward 


William  M.  St.  John 
H.  ^V.  Schrader 
E.  A.  Schroeder 
R.  E.  Stack 
H.  C.  Stevens 


Statement  of  Condition 

December  31,  1918 


RESOURCES 

Loans  and  Discounts         -__----  $230,866,965.23 

Overdrafts,  secured  and  unsecured  -----  294,513.86 
U.  S.  Liberty  Bonds,  U.  S.  Certificates  of  Indebtedness  and 

Loans  secured  by  U.  S.  Liberty  Bonds          -          -          -  142,670,748.87 

Other  Bonds  and  Securities       ------  8,930,113.30 

Stock  of  Federal  Reserve  Bank            -----  1,200,000.00 

U.  S.  and  Other  Bonds  borrowed      -----  23,798,375.00 

Bonds  Loaned           --------  50,000.00 

Banking  House         --------  2,000,000.00 

Due  from  Banks  and  Bankers    ------  3,184,655.58 

Checks  and  other  cash  items      ------  1,673,805.31 

Exchanges  for  Clearing  House  _  _  -  -  -  68,767,500.20 
Cash  in  Vault  and  Net  Amount  due  from  Federal  Reserve 

Bank       -..-------  47,165,620,03 

Interest  Accrued      -_------  1,586,840.75 

Customers'  Obligations  a/c  Bank's  Contingent  Liability       -  340,000.00 

Customers'  Liability  under  Letters  of  Credit  and  Acceptances 38,430,535.86 

1570,959,673.99 
LIABILITIES 

Capital  Stock  paid  in        -------  $25,000,000.00 

Surplus  Fund            --------  15,000,000.00 

Undivided  Profits,  less  expenses  and  taxes  paid              -          -  9,607,785.92 

Reserved  for  Taxes,  etc.             ------  3,102,476.83 

Dividend  Payable  January  2,  1919     -          -          -          -          -  625,000.00 

Dividends  unpaid    --------  14,930.00 

Letters  of  Credit -  11,239,328.75 

Acceptances  executed  for  Customers             _          -          -          -  29,843,013.21 

Deposits           - 416,013,116.05 

U.  S.  and  Other  Bonds  borrowed 23,798,375.00 

Unearned  Discount 1,407,033.59 

Bills  Payable  with  Federal  Reserve  Bank             -          -          -  33,000,000.00 

Time  Drafts  of  this  Bank  Outstanding       .           .           -           -  1,383,750.00 

Liabilities  other  than  those  above  stated     -  -  -        ^- 924,864.64 

$570,959,673.99 


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